Receivables Finance - Q & A

Receivables finance, also called invoice finance or debtor finance, is a funding arrangement where a lender advances cash against a business's outstanding customer invoices. Rather than waiting 30, 60, or 90 days for customers to pay, the business receives up to 80-85% of the invoice value within 24 to 48 hours of raising it. The remaining balance is paid when the customer settles, minus the lender's fee. The facility is secured against the invoices themselves, not property. For B2B businesses with a strong debtor ledger, receivables finance is often the most cost-effective and flexible working capital solution available.

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The problem it solves

You've invoiced. The work is done. The product has shipped. But the cash won't arrive for 60 days — and your payroll is due in five.

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This is not a sign that your business is struggling. It is a timing problem, and timing problems have solutions.

Receivables finance unlocks the value already sitting in your debtor ledger. Your customers owe you money. That obligation has real value. A lender advances against it now, you use the cash to operate and grow, and the facility repays itself when your customers pay.

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How receivables finance works - step by step

1. You raise an invoice to a business customer in the normal way.

2. You submit the invoice to your lender (usually via an online portal).

3. The lender advances 80–85% of the invoice value, typically within 24 hours.

4. Your customer pays the invoice on their normal terms (30, 60, or 90 days).

5. The lender releases the remaining balance to you, minus their fee.

6. The facility is revolving as old invoices are paid and new ones are raised, the available funds move accordingly. It grows with your business.

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The two main types

Confidential invoice discounting

Your customers never know the facility exists. You manage your own collections. Most suitable for established businesses with a structured accounts receivable function and a turnover above three million.

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Disclosed factoring

The lender is disclosed to your customers.  Some lender will manage the collection of your invoices, on your behalf, while others leave that to the business owners. More suitable for smaller businesses, those with less administration capacity, or where debtor management is a challenge.

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When can a debtor ledger be used for receivables finance?

Lenders look for: business-to-business customers (not consumers), invoices that are undisputed and relate to completed work or delivered goods, customers with reasonable creditworthiness, a spread of customers rather than concentration in one or two debtors, and clean ageing, minimal invoices significantly overdue. e.g over 90 days.

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A debtor ledger doesn't need to be perfect. Pfitz has structured receivables finance facilities for businesses with concentration issues, some slow payers, and mixed customer quality, because lenders assess the ledger as a whole, not just the best invoices.

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Industries such as manufacturing, wholesale, labour hire (recruitment), printing, food & beverages and transport are prime industries to used Receivables Finance, as they sell on a B2B bases and on trade terms, greater than 14 DOI.

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Real scenario

A client in the wholesale distribution sector had 65% of their debtor ledger tied to two large retail chains. Both were paying reliably on 60-day terms. Their supplier, however, had moved to 14-day terms following supply chain pressures.

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The gap, 46 days was quietly choking growth. They couldn't take on new orders without the cash to fund them.

We structured a receivables finance facility against the ledger. The lender accepted the concentration given the quality of the debtors. Within three weeks, the client had access to $480,000 in working capital tied to their existing invoices, with no property security required. They've since grown turnover by 35%.

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FAQ -  Receivables Finance

Is receivables finance the same as factoring?

Factoring is one type of receivables finance where the lender discloses its involvement to your customers and often manages collections. Invoice discounting is the confidential version, where you manage your own collections. Both are forms of receivables finance.

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Will my customers know I'm using receivables finance?

Not if you choose a confidential facility. Most established businesses use confidential invoice discounting, which operates entirely behind the scenes. Your customers pay into a trust account in your business name.

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Does receivables finance affect my relationship with customers?

With confidential facilities, no. With disclosed factoring, your customers will receive payment instructions from the lender, this is worth managing carefully and is something we advise on before recommending this structure.

What turnover do I need to qualify?

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Most lenders look for a minimum of $500,000 to $1 million in annual turnover for a standalone receivables finance facility. Some non-bank lenders will consider smaller businesses.

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Can I use receivables finance alongside a bank overdraft?

Usually receivables finance replaces a expensive overdrafts, where property has been taken as security. Receivables finance does traditionally require property as security.

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What does it cost?

The fee structure typically includes a discount fee (applied to the invoice value, similar to an interest rate) and a service fee. Total cost varies by lender, ledger quality, and facility size. Pfitz accesses competitive rates through our panel of lenders and provides a clear comparison before you commit.