Direct answer
Invoice finance advances funds against a business's unpaid business-to-business invoices, releasing cash tied up in the debtor ledger rather than waiting the usual thirty, sixty or ninety days for customers to pay. In Australia it is arranged through banks, private lenders and specialist funds, secured by the debtor ledger and a general security agreement, typically funds in three to ten business days, and runs as a revolving facility rather than a fixed-term loan.
Who uses it and why
Many businesses that are genuinely profitable still run short of cash simply because of the gap between delivering work or goods and being paid for them. A labour hire business pays its workforce weekly but invoices clients on sixty-day terms. A transport operator covers fuel and driver costs upfront on every job but waits over a month to be paid by the freight forwarder. A construction subcontractor completes a stage of work and issues a progress claim, then waits for the head contractor's payment cycle to run its course. In each case, the business's own cash flow is the constraint, not its underlying profitability or its order book.
Invoice finance converts that gap into available working capital: rather than waiting on customers to pay, the business draws against the value of its issued invoices as soon as they're raised, smoothing cash flow to match the pace of the business's actual operations rather than its customers' payment terms. Typical borrowers are wholesalers, labour hire operators, construction subcontractors and transport businesses with a genuine, tradeable debtor ledger and B2B customers on payment terms.
Unlike a fixed loan, this facility scales naturally with the business: as sales and invoicing grow, so does the funding available, without a fresh application each time. That makes it a particularly good fit for a growing business whose working-capital need is really a function of its own success — more orders, more invoices, more cash temporarily tied up — rather than a one-off requirement with a fixed dollar figure attached.
What lenders look at
The debtor ledger itself is the primary security and the primary focus of assessment: the quality and diversification of the business's customers, their payment history, and how concentrated the ledger is in a small number of debtors. A ledger spread across many creditworthy customers is a stronger position than one reliant on a single large debtor, since the lender's exposure ultimately depends on those customers actually paying. Advances typically extend to 80–90% of invoice value, with the balance released, less fees, once the invoice is collected.
Lenders review the business's invoicing practices, trading history, and the genuine, undisputed nature of the debtor claims — invoice finance funds real, delivered goods or services, not aspirational billing, so lenders will look for evidence that invoiced work is complete and not subject to disputes or offsets. Banks are generally the right fit for larger, well-established businesses with a strong, diversified ledger and full financial disclosure; private lenders and specialist funds serve businesses that are smaller, newer, or have a more concentrated ledger, and can typically move faster in setting up the facility.
Industry matters too: construction and subcontracting ledgers carry retention and variation risk that a straightforward wholesale ledger doesn't, and lenders experienced in that sector price and structure around it accordingly, while transport and labour hire ledgers are generally assessed on the strength and payment history of the head contractors or agencies the business works with.
Documentation is generally full-doc or alt-doc, since ongoing visibility of the ledger and the business's invoicing is central to how the facility operates day to day, not just at approval. Credit history carries a wide tolerance — this product is secured primarily against the debtor ledger rather than the borrower's own credit file, so lenders will consider applicants with defaults on file provided the ledger itself is sound.
Typical terms
|
|
| Size |
$50,000 to $20m+, subject to lender assessment |
| LVR |
Not applicable — advances typically extend to 80–90% of invoice value |
| Term |
Revolving, reviewed periodically rather than a fixed maturity |
| Speed |
Indicative funding in 3–10 business days from a complete application |
| Security |
The debtor ledger and a general security agreement |
| Pricing |
Priced on risk and security; indicative range on enquiry |
Structures we see most
Whole-ledger discounting. The entire debtor ledger is financed as a rolling facility, with the business continuing to manage its own collections, generally the most cost-effective structure for a business with a diversified, well-managed ledger.
Full-service factoring. The financier takes on collection of the ledger on the business's behalf as part of the facility, suiting businesses that would rather outsource credit control alongside accessing the funding.
Selective single-invoice funding. Individual invoices are financed on a case-by-case basis rather than the whole ledger, giving a business flexibility to fund specific invoices — a particularly large one, or one from a slower-paying customer — without committing the entire ledger to the facility.
Disclosed versus confidential facility. A disclosed facility involves customers being notified that invoices are financed; a confidential facility keeps the arrangement between the business and the financier, with collections still appearing to come from the business itself.
Progress claim funding. Structured specifically around construction-style progress claims and staged billing, accommodating the particular documentation and certification requirements of that industry's invoicing cycle.
Costs and how we're paid
Pricing on invoice finance typically combines a discount rate on the advance and, in some structures, a separate service fee for ledger management, and is quoted on enquiry once a lender has reviewed the ledger — no flat rate applies across the product. Costs vary with the ledger's quality, diversification and the debtors' payment history; all costs are set out in the facility offer before a borrower commits.
Solara is remunerated by the lender, the borrower, or both, depending on structure, which may include a commission from the lender and/or a broker fee agreed with the borrower. Any commission or fee is disclosed in writing before an application proceeds.
Process and timing
- Initial scoping call — typically same day. We confirm the business, its customer base, invoicing practices and the size of the ledger.
- Document collection — typically 1–3 business days. Sample invoices, an aged debtor listing, financials appropriate to the doc level, and evidence of trading history.
- Lender matching and submission — typically 1–2 business days. We place the file with the banks, private lenders and specialist funds whose appetite matches the ledger size and industry.
- Approval and offer — typically 2–5 business days.
- Facility setup and first drawdown — typically 1–3 business days once terms are accepted, with ongoing drawdowns available against new invoices as they're issued.
Frequently asked
What is invoice finance?
It is a facility that advances funds against a business's unpaid invoices, typically 80–90% of their value, releasing working capital without waiting for customers to pay on their normal terms.
What's the difference between invoice finance and factoring?
Factoring is one structure within invoice finance, where the financier also takes on collection of the ledger; invoice discounting is another, where the business retains its own collections. Both advance funds against the same underlying invoices.
Do my customers need to know I'm using invoice finance?
Depending on the structure, either yes (a disclosed facility) or no (a confidential facility) — many businesses prefer a confidential arrangement so the financing remains between the business and the financier.
Can I fund just one invoice rather than my whole ledger?
Yes, through selective single-invoice funding, which suits a business that wants flexibility without committing its entire debtor ledger to an ongoing facility.
What businesses is invoice finance best suited to?
Businesses issuing genuine, undisputed B2B invoices with reasonable payment terms — wholesalers, labour hire, transport and construction subcontractors are common users, since their cash flow gap is directly tied to invoice payment timing.
Does invoice finance work for a business with only a handful of large customers?
It can, though a concentrated ledger is assessed more conservatively than a diversified one, since the facility's risk becomes closely tied to the payment reliability of just a few debtors rather than being spread across many.
Can I get invoice finance with a poor credit history?
Often, yes. Because the facility is secured primarily against the debtor ledger rather than the borrower's own credit file, lenders will consider applicants with defaults on file provided the ledger itself is sound and diversified.
Is invoice finance a loan or a sale of my invoices?
It can be structured either way depending on the facility — as a secured advance against the ledger, or as an outright purchase of invoices under a factoring arrangement — with the practical effect of releasing cash tied up in receivables either way.
How does the facility limit grow with my business?
Because invoice finance is tied to the value of the ledger, the available facility typically grows as the business's invoicing and sales grow, distinguishing it from a fixed-limit loan that needs to be renegotiated as the business scales.
Related products
Trade finance — the better fit where the cash-flow gap sits earlier in the cycle, funding supplier payments or inventory rather than unpaid customer invoices.
Business lines of credit — worth considering directly where a general working-capital facility, rather than one tied specifically to the debtor ledger, is the better fit.
Unsecured business loans — the closer match where the business doesn't have a substantial B2B debtor ledger to finance against in the first place.