You've got unpaid invoices: what they can fund

A business with a long list of unpaid invoices usually isn’t short of money. It’s short of timing. The work is done, the customer is good for it, and the payment is simply sitting on a 30- or 60-day clock while wages, suppliers and tax keep their own calendars. Invoice-backed funding exists for exactly that gap: it turns “owed to you” into “available to you”.

If your business invoices other businesses, this is often the first trailhead worth checking, because the thing being lent against already exists and has a paper trail.

What do funders look at when you offer unpaid invoices?

Most people expect a funder to examine their own accounts first. With invoices, the first question points outward: who owes you the money?

A funder is really buying your customers’ reliability, so it looks at:

• The payers. Established companies, councils and government bodies with a record of paying on terms are comfortable. Customers the funder can’t check, or who routinely pay late, are not.
• Age. An invoice in its first few weeks is a different animal from one that’s three months overdue. Most funders set a cut-off beyond which an invoice is no longer eligible.
• Concentration. If one customer makes up nearly your whole ledger, a funder takes more care, because one slow payer becomes the whole risk.
• Whether the invoice is clean. The work or delivery must be complete, the amount undisputed, and no offsetting claims, such as credit notes or back-charges, hanging over it.
• Who else has a claim. If a bank’s security agreement already covers your debtors, or another financier has registered over them, that has to be sorted before a new funder can take a first claim.

Your own trading record still matters, but mostly as a check that the invoices are real and that you deliver what you bill.

How do invoices turn into funding?

The mechanics are simple. You issue the invoice. The funder advances a large share of its value straight away. When the customer pays, the funder releases the rest, minus its fees. What differs between products is who handles the collecting and whether your customer is told.

Shape	Who chases the customer	Does the customer know?	Often suits
Factoring	The funder	Yes	Smaller firms that want credit control handled for them
Confidential discounting	You	No	Established firms with their own collections process
Selective funding	Varies	Varies	Businesses that only need cash against a few big invoices
Whole-ledger funding	Varies	Varies	Businesses invoicing constantly and wanting a rolling facility

Pricing is set on your situation: the quality of your debtors, volumes, and how long invoices usually take to be paid. We don’t publish rates because they can’t be quoted honestly without that picture.

Illustrative example only. A commercial cleaning business completes a large contract for an office tenant and invoices it on 45-day terms. The next payroll and the next BAS fall before the tenant pays. Funding that one invoice releases most of its value now. The balance, less fees, follows when the tenant settles.

What do you need to hand over?

Have these ready and the conversation moves faster:

1. An aged debtors report from your accounting software, showing who owes what and for how long.
2. Copies of the invoices you want to fund, with the matching purchase orders, contracts or delivery records.
3. Your ABN or ACN and basic business details, plus the identity of the directors.
4. Bank statements showing that customer payments really arrive when your ledger says they do.
5. A note of any existing security: a bank overdraft, an equipment lease or a registration on the PPSR that touches your receivables.

If you want a short checklist for the wider pack, the funding pack guide goes through it. When you’re ready, you can also tell us what your invoices look like and a specialist will say whether this route is realistic.

What are the trade-offs of funding against invoices?

It can cost more than it looks if customers pay slowly. Fees often build for as long as an advance is outstanding, so a customer that drifts from 30 days to 75 matters.

Your customers may see a third party. Under factoring, your customers deal with the funder for payment. Some owners are comfortable with that; others aren’t.

There’s a tax wrinkle worth knowing. The ATO explains that on the non-cash (accruals) method, GST on a sale is reported when you issue the tax invoice or receive payment, whichever comes first. So you can owe the GST on an invoice before any money has landed. If you’re on that method, factor the GST portion into the cash you plan to free up. A cash-basis business reports GST when it’s paid.

Concentration limits can cap what you can fund. A funder might fund only a portion of what a single big customer owes.

When is invoice funding the wrong tool?

It rarely works for businesses that are paid at the point of sale, such as cafés, retail and most consumer services, because there is no invoice to fund. If your work is paid in stages against a contract, you might be better off looking at contract and purchase order funding. If your issue is a one-off purchase rather than a timing gap, equipment or asset finance is cleaner. And if your invoices are frequently disputed, fixing that comes before any funder will take them.

For a head-to-head view against a conventional loan, see invoice finance vs a business loan.

Do your unpaid invoices put you on a workable route?

Possibly, and the quickest way to know is to ask. Our enquiry takes about a minute, doesn’t involve a credit check, and doesn’t send your details to a crowd of lenders. A real person reads what you’ve told us and talks you through whether invoices are your best asset or whether another route fits better. Answer the form as accurately as you can, especially how much is owed, how long customers take and whether any bank holds security, because that is how we match you properly the first time. See if you qualify.