Debtor finance: a revolving facility built on what your customers owe

Debtor finance is a standing facility that lends against everything your customers owe you, rather than against one invoice at a time. You assign your debtor ledger to a lender, and it gives you access to an agreed share of your eligible receivables. As you raise invoices, your available funds rise; as customers pay, the balance clears and the cycle starts again. For a business whose sales are growing faster than its cash, that self-adjusting limit is the whole point.

If you only want to fund the odd large invoice, start with our invoice finance page. This page is about the ongoing, whole-ledger version: how it runs, what gets excluded and the contract terms that catch people out.

How is debtor finance different from funding individual invoices?

	Single-invoice finance	Debtor finance
What’s funded	Invoices you choose	Your whole eligible ledger
Limit	Per invoice	Revolving, recalculated constantly
Commitment	Usually none	Often a minimum term or fee
Admin	Upload each invoice	Regular ledger and aged-debtor reports
Typical cost per dollar	Higher	Lower, if volumes are steady
Best for	Occasional gaps	A permanent gap between sales and cash

The trade-off is commitment for cost. A whole-ledger facility usually works out cheaper per dollar drawn, but you’re signing up to an ongoing relationship with reporting obligations.

How does a debtor finance facility run day to day?

Once it’s set up, the rhythm looks like this:

• You keep invoicing as normal, and your accounting software or a regular upload shares new invoices and an aged-debtors report with the lender.
• The lender calculates your available funds. It totals eligible debts, applies an advance rate and subtracts what you’ve already drawn.
• You draw what you need, much like a line of credit, up to that available figure.
• Customers pay into a collections account controlled by the lender. With confidential facilities this can carry your business name.
• Payments reduce what you owe, and fees are charged on the balance outstanding.

Which debts usually don’t count?

Not every dollar on your ledger is eligible. Lenders commonly exclude:

• debts older than an agreed age, often anything well past its due date
• invoices to related companies or associated parties
• disputed invoices, or ones with credit notes pending
• retentions and uncertified progress claims
• overseas debtors, unless the facility is set up for them
• amounts above a concentration cap for any single customer

This is why the “headline” ledger and the funds you can actually draw can look quite different. Ask any lender to model your real ledger before you sign.

Who uses debtor finance?

It’s common among wholesalers and distributors, labour hire and staffing agencies, manufacturers, freight and logistics firms, and printing or packaging businesses: any trade where staff and suppliers are paid well before customers settle. It’s especially useful in growth phases. A business that doubles its sales usually doubles its unpaid invoices too, and a bank overdraft set on last year’s figures rarely keeps up.

It’s also used when a large customer pays slowly. Businesses with annual consolidated revenue of $100 million or more must report their payment practices under the scheme described in the Payment Times Reporting Regulator’s July 2024 reforms sheet, which lets suppliers see how long big customers typically take.

What do lenders check before setting up the facility?

Expect a lender to look closely at:

What they ask for	Why
Aged-debtors and aged-creditors reports	Shows how fast customers pay and how stretched you are with suppliers
Customer list with sales by customer	Tests concentration and credit quality
Sample invoices and proof of delivery	Confirms invoices are valid and well documented
Recent BAS and financial statements	Confirms turnover and tax lodgements are current
Details of existing loans and security	Identifies who already has a claim over your assets

That last point is the one that slows deals down. A bank that lent to your business has often registered a security interest over “all present and after-acquired property”, which is one of the categories the PPSR’s collateral class statistics track. That registration captures your receivables. The debtor finance lender will need the bank to step back from them, through a priority agreement, or will need to refinance the bank. The PPSR’s guidance for retailers notes that registered interests are visible to lenders and that the earlier registration generally wins, which is exactly why this gets sorted first.

When you’re ready to see how your ledger stacks up, start a short enquiry and we’ll look at whether a facility or a simpler loan fits.

What does debtor finance cost, and which terms matter?

Pricing is individual and depends on your volumes, your customers and how much risk the lender sees. The usual components are:

• A discount or funding charge on the amount you’ve drawn.
• A service fee, often a set monthly amount or linked to turnover through the facility.
• Establishment and audit costs, including periodic checks of your ledger.
• Minimum usage or minimum monthly fees, payable even if you draw little.
• Exit terms, such as a notice period or early termination fee.

The headline funding charge gets the attention, but minimum fees and exit clauses often decide whether a facility is good value. A seasonal business that barely draws for four months a year can end up paying for capacity it isn’t using.

Illustrative example: a food distributor in a growth year

Illustrative example: a food distributor supplying cafés, aged care kitchens and two regional supermarket groups has around $400k in unpaid invoices at any time, on 30 to 60-day terms. A new supermarket contract will add roughly $150k a month in sales, but the distributor must pay its own suppliers within 14 days.

A whole-ledger debtor finance facility replaces its overdraft. Most of the ledger qualifies, although amounts owed by a related catering company are excluded and the largest supermarket group is capped. As sales grow, the available limit grows with them. The distributor takes on the contract without asking suppliers for longer terms.

Common mistakes with debtor finance

• Ignoring the minimum fee. Model a quiet month, not just a busy one.
• Forgetting the bank’s security. Raise existing loans on day one.
• Assuming the whole ledger is fundable. Old and related-party debts usually fall out.
• Letting credit control slip. Slow collections reduce your limit and raise your costs.
• Using it for long-term purchases. A machine or fit-out belongs on equipment finance or a term loan, not a revolving ledger facility.

If your gap is smaller or irregular, a working capital loan or business overdraft may do the job with less admin. If you own property, a secured loan from $20k to $5m is worth comparing. The secured or unsecured tool helps narrow it down.

Is your debtor book working hard enough for you?

A healthy ledger is an asset, and it shouldn’t leave you short of cash every month. Tell us roughly what your customers owe, who they are and what you need the funds to do. It’s a short enquiry, around a minute, and asking doesn’t put a credit check on your file. Your details stay with us rather than being blasted to every lender in the country. A real person looks at the whole picture and gives you a call. Please answer the form carefully, including any existing loans, so the first option we put forward actually suits your ledger.

See if your ledger qualifies →