Australian small and medium sized enterprises are faced with a number of financial options when it comes to bridging gaps in cash flow.

Choosing between an Invoice Finance and bank overdraft facility can seem like a difficult comparison to make. However, for most SMEs, Invoice Finance offers fast, easy and advance access to the working capital your business is owed without the need for the classic hassles of a traditional bank-provided overdraft facility.

Find out more about Invoice Finance and learn how you can access funds in 24 hours without the need for property security or all the red tape.

What Is Invoice Finance and how does it work?

Invoice Finance provides a cash advance to Australian SMEs by leveraging the value of the unpaid invoices issued by your business to your customers.

When you submit your invoices for financing, you then receive up to 85% of the value of those invoices in working capital. You can then bridge the cash flow gaps in your business and cover wages and payroll, supplier payments and inventory orders, or invest in growth without having to wait the 30, 60 or 90 standard days for your clients to pay.

Once your clients settle their accounts you receive the outstanding balance of the value of your invoices, minus any fees.

  • Fund the invoices you choose to finance with a self-managed online portal
  • Scale your access to funding as your sales grows
  • Use your outstanding invoices as collateral so there is no need for personal property as security

How Does It Help Australian SMEs Bridge Cash Gaps?

For SMEs, especially those in industries prone to prolonged delays in customers paying invoices such as manufacturing, construction and recruitment, Invoice Finance gives you the ability to access the locked up value of your invoices ahead of time.

This means you can fund much-needed deliveries of materials, stock or inventory, continue to meet payroll on time, or finance time-sensitive market opportunities for growth and expansion.

What Is a Business Overdraft and When Does It Suit AU SMEs?

A business overdraft facility can also be used to cover gaps in cash flow but works differently.

With a business overdraft, an SME can draw funds beyond their current account balance and up to a pre-set limit.

When you borrow this overdraft capital, you pay interest only the amount used.

How Do Invoice Finance and Overdraft Differ?

Invoice Finance, offered by a non-banking specialist lender like ScotPac, can be set up and applied for with significantly less red tape. Additionally, there is no need for collateral such as property, to be eligible.

For an overdraft facility, it is tied to your existing business account and your fixed limit is capped and any additional borrowing capacity will require a new application.

How Do Invoice Finance and Overdraft Compare for Australian SMEs Seeking Fast Cash Flow Solutions?

Invoice Finance – This financial solution is great for businesses operating in the business-to-business sector with working capital tied up in unpaid invoices.

Overdraft Facility – This financial solution works for asset-rich and stable firms needing quick access to working capital for funding temporary gaps in cash flow.

The table below summarises the key differences.

Invoice Finance
Overdraft Facility

How fast is the approval process? 

Approval can be the same day with funding available 24 hours after invoices being submitted. 

Approval processes will depend on the banking institution but can take days or weeks. 

Do you need security? 

Not in the form of property or assets as your unpaid invoices serve as collateral. 

In many instances, you may need to secure your facility against property or assets. 

Will your facility scale as your business grows? 

Yes, you can scale your access to working capital as your sales ledger grows. 

You may need to reapply to borrow working capital beyond your approved fixed limit. 

Which businesses are eligible? 

All business-to-business SMEs with 6 months of trading and at least $10,000 in monthly revenue can apply. 

Each lender has its own eligibility criteria, based usually on strong creditworthiness and collateral. 

Why Choose ScotPac for your Invoice Finance Solution?

For over 35 years, ScotPac has been helping SMEs throughout Australia: It doesn’t matter whether the solution is simple or complex, if your business is small or large, or whether you are a start-up or growing enterprise, we work as your partner to fuel long-term growth.

  • ScotPac is the largest non-bank business lender in Australia
  • We currently support over 9,300 businesses.
  • We fund $26.3 billion in invoices annually

Enquire about Invoice Finance with ScotPac and learn how you can bridge a cash flow gap without the bank hassle.

FAQ: Invoice Finance vs Overdraft for Australian SMEs

IS INVOICE FINANCE BETTER THAN AN OVERDRAFT FOR FAST-GROWING AUSTRALIAN SMES?

For many SMEs in Australia, Invoice Finance offers greater flexibility, easier eligibility and better flexibility than overdraft facilities.

CAN STARTUPS IN AUSTRALIA QUALIFY FOR INVOICE FINANCE?

Yes, they can. To be eligible for an Invoice Finance solution with ScotPac, your business must meet the following eligibility criteria: 

  • Work B2B i.e., your business sells goods or services to other businesses and not direct to consumers. 
  • Your business offers standard trade credit terms on invoices. 
  • You have been in operation for at least 6 months. 
  • You can demonstrate consistent invoicing and collections. 
  • Your customers are creditworthy Australian businesses. 
  • Your monthly turnover is at least $10,000. 
  • You are registered and operate in Australia. 
  • Your invoice is issued in Australian dollars (AUD). 

DOES INVOICE FINANCE REQUIRE NOTIFYING CUSTOMERS UNLIKE OVERDRAFTS?

This will depend on whether you choose Invoice Factoring or Invoice Discounting.  

ScotPac offers two forms of Invoice Finance 

  • Invoice Factoring involves your lender, i.e., ScotPac, to manage your accounts receivable and handle debt collection. This form is not confidential. 
  • Invoice Discounting involves you managing your accounts receivable and handling debt collection, offering a more confidential arrangement.  

HOW MUCH CAN AUSTRALIAN SMES FUND WITH SCOTPAC INVOICE FINANCE?

At ScotPac, we tailor our finance solutions to suit your needs. In general, SMEs can access up to 85% of their invoices value in advance and fund up to $200 million. 

WHAT IF A CUSTOMER DOESN'T PAY AN INVOICE UNDER SCOTPAC FINANCE?

Whilst our team will work with you to mitigate this risk and will conduct credit checks during the application stage, if non-payment from customers is a concern of yours, speak to our team about Bad Debt Protection. 

WHICH COSTS MORE: INVOICE FINANCE OR OVERDRAFT FACILITIES?

ScotPac’s Invoice Finance avoids the excessive interest costs of traditional banking-provided overdraft facilities. For growing SMEs, scalability saves more money long-term as limits auto-expand and fees are tied to the value of the invoices financed.  

CAN AUSTRALIAN SMES IN MANUFACTURING OR WHOLESALE USE INVOICE FINANCE INSTEAD OF OVERDRAFTS?

Yes, they can. Invoice Finance gives fast access for business-to-business SMEs looking to unlock the cash tied up in unpaid invoices. For sectors like manufacturing and wholesale, Invoice Finance is an effective solution to help cover operational expenses and seize new opportunities.  

Discover how Invoice Finance with ScotPac can help your business and enqruire now.