Your finance broker Corey Marino Founder & Finance Broker, FBAA member M-354085 · Diploma-qualified finance broker
The short answer
Invoice finance can bring customer receipts forward, helping bridge wages and supplier payments. Measure the net cash released after fees and reserves, then compare the benefit with the full facility cost at the volume you expect to use.
Invoice finance turns eligible unpaid customer invoices into earlier access to working capital. It can help a growing business bridge the gap between completing work and being paid, but the approved limit is not the same as cash immediately available.
The useful calculation starts with eligible invoices, the lender's advance rate, existing drawings and every facility charge.
Follow one invoice from issue to payment
Map the actual trading cycle: the work is completed, an invoice is issued, the customer approves it and payment arrives. Then identify when wages, materials, freight and tax are paid during that cycle.
If a sound customer takes 30 or 60 days to pay while the business carries those costs earlier, invoice finance may bring part of the receipt forward. When the customer pays, the advance and applicable charges are reconciled and the remaining amount becomes available according to the facility terms.
Work from eligible receivables
Not every amount in the debtor ledger will necessarily support an advance. Eligibility can be affected by invoice age, disputes, customer location, contractual rights, related-party transactions, progress claims, credit notes or concentration in one customer. Section 5 of NAB's July 2021 user guide illustrates borrowing-base deductions; the current facility contract determines yours.
Build a short schedule showing:
- total accounts receivable;
- invoices outside the lender's age limits;
- disputed, related-party or otherwise ineligible invoices;
- eligible receivables after exclusions;
- the applicable advance percentage;
- existing drawings and retained reserves; and
- the net amount available before fees.
This prevents the headline facility limit from being mistaken for usable cash.
Compare the complete fee structure
Invoice-finance pricing can include a discount or interest charge on funds used, plus service, administration, audit, establishment or minimum-volume charges. NAB explains its own calculation bases; compare the actual terms rather than fee names alone.
Ask for a worked example based on the business's expected ledger and draw pattern. Record the cost in dollars for a normal month, a high-growth month and a month where customer payments arrive late. Also check contract length, notice periods, minimum charges and the cost of leaving the facility.
Measure the benefit, not only the expense
Earlier cash can create value if it allows the business to accept profitable work, obtain supplier discounts, reduce late-payment costs or avoid operational interruptions. Quantify that benefit conservatively.
For example, compare:
| Monthly effect | Without facility | With facility |
|---|---|---|
| Lowest projected cash balance | ||
| Supplier payments made on time | ||
| Existing short-term debt cost | ||
| Invoice-finance charges | ||
| Additional gross profit supported |
A facility that improves timing but supports no measurable operating benefit may simply add cost. Conversely, the cheapest-looking option may not help if its eligible ledger calculation leaves too little availability during the peak gap.
Test normal, growth and late-payment cycles
This hypothetical model uses an 80% advance, 12% annual interest on the full advance using a 365-day year, and a service fee of 1% of invoice face value. It assumes no other charges, no earlier repayment, fully eligible invoices and enough facility capacity. The late cycle lasts 45 days, so it is not presented as a like-for-like monthly rate.
| Measure | Normal 30-day cycle | Larger 30-day cycle | Late 45-day cycle |
|---|---|---|---|
| Invoice face value | $100,000 | $150,000 | $100,000 |
| Advance outstanding | $80,000 | $120,000 | $80,000 |
| Service fee | $1,000 | $1,500 | $1,000 |
| Interest over the cycle | $789.04 | $1,183.56 | $1,183.56 |
| Total modelled facility cost | $1,789.04 | $2,683.56 | $2,183.56 |
For a separate monthly-benefit test, assume earlier cash allows $3,000 of additional gross profit, avoids $400 of other funding cost, but requires $300 of extra administration. Deducting the normal-cycle $1,789.04 charge leaves an illustrative $1,310.96 incremental benefit. Do not count the $80,000 advance as revenue or profit; it brings forward a receipt the business was already owed.
Replace the gross profit, avoided cost and admin assumptions with evidence. Do not combine benefits that overlap, and include minimum fees, excluded invoices and the effect of late payments on availability. The invoice-cost guide explains the reserve and borrowing-base calculation.
Consider customer concentration and control
If a large share of revenue comes from one debtor, that customer's credit quality and payment behaviour can heavily influence availability. Model what happens if that customer pays late, disputes an invoice or no longer qualifies.
Also confirm how collections operate. Some facilities are disclosed to customers and some can operate confidentially, subject to provider criteria. Understand who communicates with customers, where payments are directed and what reporting the business must maintain.
Prepare the evidence
Useful information can include an aged receivables report, aged payables, customer concentration report, recent bank statements, sample invoices, contracts or purchase orders, current tax position and a cash-flow forecast. Reconcile the ledger to the accounting system before assessment so old credits and disputed items are not presented as available working capital.
How X Lend Finance assesses the fit
We compare the requested facility with the actual debtor ledger, payment cycle and peak funding gap. Suitable options are assessed using expected availability, total charges, security, customer concentration and exit conditions. The provider makes the final eligibility and advance decisions; the comparison should show whether earlier access to receipts produces a worthwhile net operating benefit.