Small businesses with B2B customers on 30, 60 or 90 day payment terms can usually access invoice finance, despite a common assumption that the product is reserved for larger operators. Typical facilities advance 80 to 90 per cent of each invoice value, with total facility size scaling against your sales ledger. This article walks through how much funding is actually available to a small business, what drives the limit up or down, and how to choose a structure that fits a smaller operation. For the basics, see what is invoice finance.
The advance rate: what you get per invoice
When you submit an invoice, the lender advances a percentage of its face value as cash to you within 24 to 48 hours. The remaining percentage is held back until the customer pays in full.
Typical advance rates by industry:
Manufacturing, wholesale, distribution: 85 to 90 per cent.
Labour hire and recruitment: 85 to 90 per cent (this segment has the most mature factoring programs in Australia).
Transport and logistics: 80 to 90 per cent depending on the lender.
Professional services and consulting: 75 to 85 per cent (services-based invoicing can be harder to underwrite).
Construction subcontractors: 70 to 80 per cent (retention provisions and progress claim complications reduce the advance).
On a $50,000 invoice with an 85 per cent advance rate, you receive $42,500 in cash within 48 hours of submitting the invoice. The remaining $7,500 (minus the lender fee) comes when the customer pays.
Total facility size: how big the limit can go
The overall facility limit is usually set at a multiple of your monthly invoicing - typically 1 to 2 times monthly sales, sometimes higher for established businesses. A small business invoicing $100,000 per month could expect a facility limit somewhere between $100,000 and $200,000.
The limit grows as your invoicing grows. This is the key structural appeal for fast-growing small businesses: the facility scales with sales automatically, without needing to renegotiate every time you win a larger contract.
What pushes the limit up
Stronger underlying business. Profitability, clean trading history, GST registration, established ABN.
Better customer ledger. Diverse customer base with established credit history beats concentrated ledger or unknown customers.
Longer trading history. 2+ years operating beats 6 months trading.
Mature accounts processes. Aged debtor reports that show <10 per cent over 60 days; clean reconciliation; integrated accounting software.
What pulls the limit down
Customer concentration. If one customer represents 40+ per cent of your invoices, lenders cap exposure to that customer or reduce the advance rate.
Disputed invoices. Lenders exclude any invoice currently in dispute. If your historical dispute rate is high, the funded portion of your ledger shrinks.
Slow-paying customers. Customers who routinely pay past 90 days may not be funded at all.
Related-party invoices. Invoices to entities you own or control are typically excluded from funding (lender does not want self-dealing risk).
Government customers with extended payment cycles. Some lenders fund these at reduced rates; others exclude them.
Structures that suit a small business
Selective invoice finance. Cherry-pick which invoices to fund. Useful for small businesses that only need to fund a few large invoices rather than commit the whole ledger. Per-invoice cost is higher than a whole-ledger facility but you only pay for what you use.
Confidential invoice discounting. Suits small businesses that want to keep the lender invisible to customers. Requires reasonable collections capability on your end.
Full-service factoring. Suits small businesses where collections workload is a meaningful constraint. Lender handles customer follow-up; customers are aware finance is involved.
For the structural differences between these, see invoice finance vs factoring vs invoice discounting or pros and cons of invoice factoring.
Minimum facility sizes
Most lenders have minimum facility sizes (often $50,000 to $250,000) and minimum monthly invoicing requirements (often $20,000 to $100,000 per month). Below those thresholds, the lender administrative cost outweighs the revenue.
For very small businesses below those minimums, alternatives include:
A working capital line of credit secured against the business rather than specifically against invoices.
An unsecured business loan funded against trading history.
A merchant cash advance funded against card sales (only suits B2C or card-paying segments).
Cost for a small business
All-in cost for a small-business invoice finance facility typically runs 10 to 25 per cent annualised. The smaller the facility, the higher the per-dollar cost because lender fixed costs are spread across less revenue.
The honest test: compare the all-in annualised cost to (a) the gross margin in the invoices being funded and (b) the value of the orders you could accept by having faster cash. Where the maths work, invoice finance is the right call. Where it eats most of the margin, look at the alternatives instead.
Where to from here
We arrange invoice finance and factoring for small and growing businesses across our lender panel. No fees to clients; the lender pays us when the facility settles. Book a 20-minute brief to work out what facility size your invoicing supports.
Want to talk specifics?
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