Invoice (debtor) finance: turning unpaid invoices into working capital

Last updated 6 November 2026 · Reviewed by 360 Asset Finance Compliance

How does invoice finance work in Australia?

It's designed for businesses that sell to other businesses on credit terms, where cash is tied up between invoicing and being paid. In general terms:

1. You deliver the goods or services and invoice your business customer as usual.
2. You give the invoice, or your whole list of unpaid invoices, to the lender.
3. The lender advances part of the invoice value to your business account.
4. Your customer pays the invoice, often into an account the lender controls.
5. The lender releases the rest to you, less its fees.

Because the invoices are the main security, the lender will look at your customers and invoices as well as your business, and will assess your application against its criteria.

What's the difference between factoring and invoice discounting?

• Factoring. The lender buys or takes over your invoices and usually manages collection, so your customers pay the lender.
• Invoice discounting. You keep managing your own collections, and your customers may not know a lender is involved.
• Whole-of-ledger or selective. Some facilities cover all your invoices; others let you choose individual invoices or customers.
• Recourse or non-recourse. With recourse, if a customer doesn't pay, the debt comes back to your business. Non-recourse terms shift some of that risk to the lender, usually at a higher cost.

How does invoice finance compare with a line of credit or an unsecured business loan?

A general summary only: exact terms depend on the lender and the agreement.

What does invoice finance cost, and what should I check?

Pricing is usually a discount or interest charge on the funds you use, plus fees such as set-up or service fees. Check:

• the total cost, including every fee, not just the headline charge;
• any minimum usage fees, and what it costs to end the agreement;
• who collects from your customers, and what happens if one pays late or doesn't pay;
• what security the lender takes, such as a registration on the Personal Property Securities Register (PPSR), and whether directors must sign personal guarantees.

If you're signing as a guarantor, consider getting independent legal advice first.

Who might invoice finance suit?

This isn't a recommendation. In general terms, it's often considered by businesses that:

• sell to other businesses or government on credit terms;
• are growing, or have seasonal peaks, so more cash is tied up in invoices;
• don't want to offer property as security.

It's generally less relevant if most sales are paid on the spot, for example by card.

Pros and cons

Possible advantages

• It can release cash tied up in unpaid invoices.
• The funds available can grow as your sales grow.
• It's secured by your invoices, so you may not need to offer property.

Possible drawbacks

• Fees and charges can add up, so the total cost needs careful comparison.
• With recourse facilities, unpaid invoices still come back to your business.
• It depends on having business customers who pay on credit terms.

How do I apply for invoice finance, step by step?

1. Work out how much cash is tied up in unpaid invoices and which customers they're from.
2. Talk to your accountant about how a facility would fit your business, including tax and GST.
3. Tell your broker about your business and customers, and compare factoring and invoice discounting options across the panel.
4. Your broker prepares the application with the documents the lender asks for. The lender will assess your application against its criteria.
5. If it's approved, you sign the agreement, the facility is set up and you start sending invoices to the lender.

How can 360 Asset Finance help?

We're a broker working with a panel of specialist lenders. We can:

• arrange invoice finance through our lender panel, including factoring and invoice discounting, subject to the lender's criteria;
• compare facilities across our panel, including fees, collections and recourse terms;
• tell you what the lender needs, commonly your ABN, ID for directors, financial statements or BAS, and a list of who owes you money;
• work alongside your accountant, who can explain the tax and GST side;
• prepare the application, work with the lender and keep you updated through to settlement;
• show you other options to compare, such as a line of credit.

FAQs

Sources and further reading:business.gov.au: Apply for a business loan · business.gov.au: Payment terms · business.gov.au: Improve your cash flow

General information only. It doesn't take into account your objectives, financial situation or needs, and it isn't credit, tax or legal advice. Finance is provided by the lender you choose and is subject to its lending criteria; fees and charges apply. 360 Asset Finance is a trading name of Kuone Consulting Pty Ltd (ABN 75 647 329 002), Australian Credit Licence 566705.