Invoice finance: get paid now for work you've already done

If your business is owed a lot of money by other businesses, you already have an asset you can borrow against. Invoice finance turns those unpaid invoices into cash now, instead of in 30, 60 or 90 days.

How invoice finance works

1. You invoice as normal. You deliver the goods or service and issue an invoice to your business customer.
2. You submit the invoice. Usually through a portal linked to your accounting software, such as Xero or MYOB.
3. You receive an advance. The lender pays a large share of the invoice value, often within a day of approval.
4. Your customer pays. Either into your account (confidential) or into a lender-controlled account (disclosed).
5. You get the rest. The lender releases the balance, less its fees.

Because the facility is tied to your sales ledger, it grows as your invoicing grows. That’s the key difference from a fixed loan.

Confidential or disclosed?

	Confidential	Disclosed
Customers know?	No	Yes
Who collects?	You	You or the lender
Typical fit	Established businesses with good collections	Growing businesses, or where collection help is useful

Confidential facilities usually ask for stronger trading history and tidy books, because the lender relies more on your collection process.

What lenders look at

With invoice finance, the lender cares as much about your customers as about you:

• Who your debtors are. Government, councils and large companies are usually seen as strong debtors.
• How concentrated the ledger is. One customer making up most of the book adds risk.
• How quickly debtors pay. Your aged receivables report tells this story.
• Disputes and credit notes. Frequent disputes reduce what can be financed.
• Your accounting. Clean, up-to-date records in cloud software speed everything up.

Lenders will register a security interest over receivables on the Personal Property Securities Register.

Where it fits best

• Labour hire and recruitment, paying workers weekly but invoicing monthly.
• Wholesale and distribution, shipping goods on 30 to 60 day terms.
• Manufacturing, buying materials long before the customer pays.
• Transport and logistics, with fuel and wages up front.
• Trades and construction, where progress claims are slow to clear; see our page on construction and trades.

It’s less useful for businesses that sell mainly to consumers, or whose invoices are often disputed.

How fast does it move?

Setting up a facility involves checking your ledger, your debtors and your accounting, which takes longer than a simple unsecured loan. Once it’s running, though, new invoices can usually be funded quickly, often the next business day.

If you need cash this week and the facility doesn’t exist yet, a short unsecured loan might bridge the first gap while invoice finance is set up for the longer term.

Understanding the cost

Invoice finance is typically priced with:

• A service or administration fee, often a percentage of invoices financed.
• A discount or interest charge on funds advanced, for the time they’re outstanding.
• Sometimes establishment, audit or minimum-use fees.

Compare facilities by asking for the total cost in dollars on a typical month’s invoices, not just headline percentages.

An illustrative example

A Palmerston North labour hire firm places 40 workers with three large regional employers. Wages go out every Wednesday, but clients pay on the 20th of the following month. As the firm grows, the gap grows with it: by spring, it’s carrying around $350,000 in unpaid invoices.

A disclosed invoice finance facility advances most of each invoice the day after it’s issued. Payroll is covered from the advances, and when clients pay, the balance comes back less fees. As the firm adds a fourth client, the facility limit rises without a new application.

Is it the right fit?

If customer payment terms are your main cash constraint, invoice finance is usually the most efficient fix. For a one-off gap, a cash flow loan or line of credit may be simpler.

Tidy books make it faster

Invoice finance runs on your accounting data, so clean records pay off straight away. Before you apply, reconcile your bank feeds, chase or credit any very old invoices, and make sure customer details are complete. An aged receivables report that matches reality lets the lender approve a facility quickly and fund the first invoices without back-and-forth.

Talk it through

Asking what’s possible doesn’t touch your credit file, and your details aren’t sent to a list of lenders. A real person reads your enquiry, looks at whether your debtors and ledger suit invoice finance and calls you. Start your enquiry.