Invoice finance: unlock cash from unpaid invoices

Why invoice finance can work after a decline

When a bank declines a working-capital request, it’s usually assessing you: your financials, your credit, your history. Invoice finance shifts the focus. The main question becomes whether your customers will pay their invoices.

If your customers are established businesses or government bodies with good payment records, that can matter more than your own short history or a past credit listing. That’s why invoice finance is often a good fit for businesses declined elsewhere.

How it works

1. You issue an invoice to a business customer as normal.
2. The financier advances a large share of the invoice’s value, often within a short time.
3. Your customer pays the invoice, either to you or to the financier, depending on the setup.
4. The financier releases the remaining balance, less its fees.

As your sales grow, the funding available grows with them.

Factoring versus discounting

	Factoring	Invoice discounting
Who collects	Usually the financier	You
Do customers know?	Usually	Often not
Suits	Smaller or newer businesses	More established businesses with good systems
Control	Less	More

Some financiers also offer selective or single invoice finance, where you choose which invoices to fund.

Who invoice finance suits

• Trades and contractors invoicing builders, councils or larger companies.
• Wholesalers and manufacturers selling to retailers.
• Labour hire and recruitment businesses with weekly payroll and monthly invoicing.
• Professional services billing corporate clients.
• Transport and logistics operators with regular customers.

It’s less suitable if you sell mainly to consumers, if your invoices are frequently disputed, or if one customer makes up nearly all of your income.

What financiers look at

• Your customers: who they are and how reliably they pay.
• Your invoices: clear, undisputed, on standard terms.
• Concentration: how much depends on a single customer.
• Your systems: an up-to-date accounting system and aged receivables report.
• Your tax position: ATO debts can rank ahead in some situations, so financiers check.
• Your history: still considered, but often less decisive.

If your bank said no to working capital but you’re waiting on customer payments, tell us about your invoices.

Costs and considerations

Invoice finance costs vary with the volume, your customers, how long they take to pay and the type of facility. Ask for a worked example in dollars on a typical invoice. Check contract length, minimum volumes and any fees to exit. For a revolving buffer that isn’t tied to invoices, compare with an unsecured line of credit.

Illustrative example: A traffic management company, eleven months old, had invoices outstanding with two large civil contractors on 45-day terms. Its bank declined a facility because of short trading history. An invoice financier assessed the contractors’ payment records and advanced funds against the outstanding invoices, easing weekly payroll pressure.

What does a financier look for in your debtor ledger?

Your aged receivables report, the list of who owes you what and for how long, is the heart of an invoice finance application. A financier will read it closely.

• Age of invoices. Invoices well past their due date may not be funded at all, and a ledger full of them raises questions about collections.
• Spread of customers. A healthy mix reduces risk. Heavy reliance on one or two customers can limit how much is advanced against their invoices.
• Disputes and credit notes. Frequent adjustments suggest invoices may not be paid in full.
• Related-party invoices. Invoices to businesses you or your family own are usually excluded.
• Progress claims and retentions. In construction, these can be harder to fund because payment depends on certification and contract terms.

Tidying your ledger before applying helps. Chase or write off very old invoices, resolve disputes and make sure your accounting software matches reality.

When invoice finance isn’t the right fit

Invoice finance is powerful for the right business, but it isn’t for everyone. It tends not to suit:

Situation	Why it’s a poor fit	Possible alternative
Mostly cash or card sales	No invoices to fund	Revenue-based finance
One customer is nearly all your income	Concentration risk	Secured lending or a line of credit
Frequent invoice disputes	Payments are uncertain	Fix disputes first
Very small, occasional invoices	Fees may outweigh benefit	An overdraft-style line of credit
Customers who forbid assignment of debts	Contract terms can block it	Check contracts, consider discounting

Some supply contracts include clauses about assigning or charging receivables. Check yours, or ask the financier to review them, before signing anything. If invoice finance isn’t the answer, a bank statement loan or secured facility may suit better.

Quick checklist before applying

• Export an up-to-date aged receivables report.
• Resolve any disputed invoices or credit notes.
• Check customer contracts for clauses about assigning debts.
• Confirm your ATO position, including any outstanding BAS.
• Note how much of your income comes from your largest customer.
• Decide whether you want the financier to collect, or to keep collecting yourself.

Your customers may be your best asset

If your invoices are solid, they can do the heavy lifting. Enquiring with us doesn’t trigger a credit check, and your details aren’t handed out to multiple financiers. A real person reads your situation and calls you. Please tell us roughly how much you invoice each month and who your main customers are, so we can match you properly. See if you qualify.