One of the most common cash flow challenges for Australian SMEs is the gap between issuing invoices and receiving payment. Invoice finance — also called debtor finance or invoice factoring — bridges that gap by advancing you up to 85–90% of the invoice value immediately.
How Does Invoice Finance Work?
When you issue an invoice to a customer, you submit it to your invoice finance provider. They advance you up to 85–90% of the invoice value within 24–48 hours. When your customer pays the invoice (on their usual 30, 60 or 90-day terms), the finance provider releases the remaining balance minus their fee.
The result is that you receive most of the cash almost immediately, rather than waiting months for payment. This dramatically improves cash flow and allows you to take on new work, pay suppliers, meet payroll and grow your business without being constrained by your customers' payment terms.
Types of Invoice Finance
- Invoice factoring: The lender manages collections on your behalf and your customers are aware of the arrangement.
- Invoice discounting: You retain control of collections and customer relationships; the facility is confidential.
- Selective invoice finance: You choose which invoices to finance rather than committing your entire debtor book — ideal for occasional cash flow gaps.
- Trade finance: Funding for importers and exporters to bridge the gap between placing and receiving orders.
Fees are typically expressed as a percentage of the invoice value per month (often 1–3%), rather than an annual interest rate. The exact cost depends on your debtor book quality, invoice values and the provider.
Who Is Invoice Finance Best Suited For?
Invoice finance works best for businesses that invoice other businesses (B2B) on extended payment terms. It's particularly popular in transport and logistics, construction and subcontracting, labour hire, manufacturing and professional services.
It is less suitable for businesses that deal primarily with consumers (B2C), receive payment upfront, or operate in industries with high rates of invoice disputes.
How Overdrive Funding Can Help
We compare invoice finance providers across our panel to find competitive rates and flexible terms that suit your business. Whether you need a full debtor finance facility or selective invoice funding, we'll match you with the right provider.