By the Loan Phone team Reviewed by Anthony Moncada, M.App.Fin, Cert IV Finance & Mortgage Broking
Debtor finance Australia provides businesses with funding based on their outstanding customer invoices, improving cash flow without taking on additional debt. Rates typically range from 1-5% per invoice (indicative only), with advances of 70-90% of invoice values, allowing businesses to access funds quickly rather than waiting for customer payments.
Modern platforms can provide fast assessment, with funding often available within 24-48 hours of invoice submission. Most lenders require valid business invoices, creditworthy customers, and regular invoice generation, though specialist lenders may work with various business profiles.
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What is Debtor Finance?
Debtor finance, also known as invoice finance or factoring, is a funding solution that allows businesses to access the cash tied up in their outstanding customer invoices. Instead of waiting 30, 60, or 90 days for customers to pay, you can receive an immediate advance (typically 70-90% of the invoice value). This is a powerful tool for businesses with strong sales but slow-paying customers, helping to manage working capital more effectively.
How Debtor Finance Works in Australia
The process is simple and designed for speed:
- Invoice and Submit: You issue an invoice to your customer for goods or services delivered and submit a copy to the debtor finance provider.
- Receive Advance: The provider verifies the invoice and advances you up to 90% of its value, often within 24 hours.
- Customer Pays: Your customer pays the invoice according to its terms, usually directly to the finance provider.
- Receive Balance: Once the invoice is paid in full, the provider remits the remaining balance to you, minus their fees.
Types of Debtor Finance Available
- Invoice Factoring: The finance provider manages your sales ledger and collects payments from your customers directly. This is a comprehensive service that can reduce your administrative burden.
- Invoice Discounting: You maintain control over your sales ledger and customer relationships, collecting payments yourself. This is a confidential arrangement where your customers are unaware of the financing.
- Selective Invoice Finance: Gives you the flexibility to choose which specific invoices you want to finance, rather than funding your entire sales ledger.
Eligibility Requirements
Lenders focus more on the quality of your invoices and customers than your business’s credit history. Key requirements include:
- An active ABN with at least 6-12 months of trading history.
- You must be invoicing other businesses (B2B).
- Your customer base must be creditworthy.
- Invoices must be for completed work and not in dispute.
Benefits of Debtor Finance
- Improved Cash Flow: Access funds within 24-48 hours instead of waiting weeks or months.
- Growth Funding: The funding available grows automatically as your sales increase.
- Reduced Admin: In a factoring arrangement, the provider handles payment collections.
- No Property Security: The invoices themselves act as the security, so you don’t need to use real estate as collateral.
Costs and Considerations
Fees typically range from 1-5% of the invoice value and depend on factors like your industry, sales volume, and the creditworthiness of your customers. It’s crucial to compare the total cost, including any service or account management fees, not just the headline rate.
Choosing the Right Debtor Finance Provider
Look for a provider with experience in your industry, a transparent fee structure, and a modern online platform that integrates with your accounting software. Using a comparison service can help you evaluate multiple specialist lenders to find the best fit for your business needs.
Frequently Asked Questions
How quickly can I access funds with debtor finance? Very quickly. Once your facility is set up, you can typically receive an advance on submitted invoices within 24 to 48 hours. This rapid access to cash is a primary benefit of debtor finance.
What happens if my customers don’t pay their invoices? This depends on whether you have a “recourse” or “non-recourse” facility. With recourse factoring, you are ultimately responsible for the bad debt. With non-recourse factoring, the lender takes on the credit risk (usually for a higher fee).
Can I use debtor finance if I have a bad credit history? Yes, it’s often possible. Debtor finance focuses on the creditworthiness of your customers and the quality of your invoices, not your own credit score. This makes it an accessible option for businesses that may not qualify for traditional business loans.
Speak with Specialists
Ready to explore debtor finance options for your business?
Email: loans@loanphone.com.au
Website: www.loanphone.com.au
Related Resources
Explore these related guides for managing business cash flow and funding:
Disclaimer: This article provides general information only and should not be relied upon as financial or tax advice. Rates, terms, and eligibility vary by lender and individual circumstances. Tax benefits are subject to your specific business structure and circumstances. Always seek independent professional advice from a qualified accountant and financial adviser before making financing decisions.
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Last updated: October 19, 2025