Invoice finance for a labour-hire firm

The situation

This is an anonymised composite reflecting a common pattern, not a specific settled transaction. A labour-hire business supplies staff to several mid-sized construction and logistics clients, invoicing on 30 to 60 day payment terms, but must pay its own workforce weekly. As the business wins more contracts, the gap between paying wages and being paid by clients grows wider, constraining how much additional work it can take on.

Why it's hard

The business is growing and profitable on paper, but its cash flow is structurally mismatched — wages go out weekly while invoices are paid on terms set by its larger clients, who are unlikely to shorten those terms for a smaller supplier. A standard term loan does not scale with this growth, and the business's own balance sheet, being largely payroll and receivables rather than property, limits what a property-secured facility could offer.

How it can be structured

An invoice finance facility, structured as either factoring or invoice discounting depending on whether the business wants collections managed directly or to retain that relationship itself, advances a proportion of each invoice's value as it is issued, closing most of the gap between paying wages and being paid by clients; the exit here is simply the client paying the invoice in the ordinary course, with the facility revolving as new invoices are issued. Because the facility scales with the debtor book, the business's available funding grows automatically as it wins more contracts, without needing to renegotiate a fixed limit each time. Where the client base is concentrated in just one or two large customers, a lender may structure the facility with debtor concentration limits, which is worth discussing upfront rather than discovering during assessment.

Labour-hire businesses carry a specific compliance consideration lenders in this space will check closely, confirming the business holds any required labour-hire licensing in the states it operates in and that its own payroll and superannuation obligations to its workforce are being met consistently, since a business falling behind on these obligations presents a risk the invoice finance facility itself cannot insulate against. Where the business supplies staff to a small number of very large clients, such as major construction or logistics companies, the strength of those clients' own credit standing can actually work in the business's favour, since a financier assessing the debtor book is, in effect, assessing the paying capacity of well-established companies rather than the labour-hire firm itself. Facilities are typically reviewed periodically as the client base evolves, and a labour-hire business that diversifies its client mix over time, rather than remaining concentrated in one or two accounts, generally sees its facility limit and terms improve as a result.

What it typically costs

Pricing on invoice finance reflects the quality and diversity of the debtor book, quoted per invoice or on the overall facility, and assessed on enquiry once a lender has reviewed the client base and payment history. Costs are generally structured as a discount on advanced funds rather than a traditional interest rate, reflecting the short-dated, self-liquidating nature of each advance.

Timeline

1. Same day — scoping call confirming the client base, invoicing terms and current payroll cycle.
2. 2–5 business days — debtor book review and lender matching.
3. 5–10 business days — facility approval and documentation.
4. 1–2 business days — first drawdown against current outstanding invoices.

Questions we'd ask you

1. Who are your largest clients, and what proportion of revenue does each represent?
2. What are your typical invoice payment terms, and how consistently are they met?
3. Would you prefer collections managed directly by the financier, or to retain that relationship yourself?
4. What is your current weekly payroll obligation relative to outstanding invoices?
5. Are you anticipating further contract growth that this facility needs to scale alongside?

Related

Invoice finance · Business owners · Factoring · Invoice discounting