Updated 2nd December 2025

If you are a small or medium sized enterprise (SME) in Australia, you may be wondering is Invoice Finance worth it?

This useful financial facility is designed to help businesses better manage cash flow despite long payment terms with clients and customers.

But as with all financial products, there are trade-offs to consider.

In this guide to Invoice Finance pros and cons, we will explore the key benefits and the main disadvantages to help you determine if it is right for you.

What is Invoice Finance and how does it work?

  • Invoice Finance enables businesses to access the working capital tied up in their unpaid invoices.
  • Standard payment terms of 30 days (with some businesses having to wait as much as 60 or 90 days) can mean that your cash flow management is severely impacted.
  • With Invoice Finance, you can receive up to 85% of the value of those outstanding invoices as a cash advance. The rest, less any fees, is paid once your customer settles their account.
  • For businesses where payment terms are even longer, such as construction and manufacturing, Invoice Finance can be even more important.

Are there different types of Invoice Finance?

Yes.

There are two main types of Invoice Finance:

1. Invoice Factoring

2. Invoice Discounting

What is Invoice Financing? 

In this form of Invoice Finance, your finance provider ‘purchases’ the invoices and manages the ledger, thereby making them responsible for collecting payment from your customers.

What is Invoice Discounting? 

In this form of finance, you maintain control over the collection of your unpaid invoices, which makes it a more confidential arrangement.

To find out which form of Invoice Finance may be better for your business, contact the ScotPac team today.

What are the key Invoice Finance pros and cons?

What are the pros to Invoice Finance?

1. Faster access to working capital 

First and foremost, Invoice Finance provides immediate access to the money your business is owed.

This allows for better cash flow management and can ensure you have the funds to cover payroll, pay for new stock, or reinvest in growth without taking on debt.

2. Scalable with your operations 

As your sales grow and as your business expands so too will your available funding.

With Invoice Finance, your ability to access working capital increases with your turnover. For businesses with seasonal fluctuation in demand, this can be advantageous.

3. No security and no debt 

Invoice Finance is not a business loan, which means it won’t increase your debt-to-equity ratio or impact future credit-seeking opportunities.

Similarly, the invoices themselves serve as collateral so there is no requirement for you to put up property or other assets as security.

4. Easier application 

With ScotPac’s technologically enabled application process, approval is quicker for Invoice Finance than traditional bank loans.

You can access your funding facility in a matter of days!

Plus, with Invoice Finance, there is less emphasis on your business’s credit history and more emphasis on your monthly turnover and customers’ creditworthiness, making access and the application process significantly easier for SMEs.

5. Predictability and low cost 

Compared to other forms of finance, Invoice Finance is worth it in many cases due to the predictability in working capital access and low cost.

Some alternative forms of funding, such as bank overdrafts, are subject to high interest rates and fluctuating limits. With Invoice Finance, you know your funding capacity as it is tied to the value of your invoice and maintain complete control over access to working capital and associated costs.

Would you like to discuss the pros of Invoice Finance for your business? Call us today to speak to a lending specialist on 1300 863 502.

What are the cons to Invoice Finance?

1. Fees can vary by lender 

With Invoice Finance, the fees associated with access to the facility vary in the market.

Whilst standard service fees range from 0.5% to 3%, depending on the value of your invoices submitted for funding, this can add up.

Always compare rates between providers under consideration, and make sure that any lender you are speaking with provides you with complete transparency and upfront information about associated costs with the facility.

3. Industry suitability 

Unfortunately, Invoice Finance is not available to businesses who operate directly with consumers (B2C).

Only companies operating in the business-to-business (B2B) space with reliable and creditworthy customers/clients are able to access this financial solution.

3. Confidentiality 

With Invoice Factoring, your funding provider is in charge of collecting payment. This means that it is harder to maintain confidentiality regarding your use of the finance solution.

There is a potential impact on your customer relationships as a result, however this can be mitigated through careful consideration of your finance provider.

If you are concerned about associated fees, confidentiality or whether Invoice Finance is worth it for your business, contact your nearest ScotPac office for a no-obligation, custom consultation.

Frequently Asked Questions About Invoice Finance

Who should opt for invoice factoring and invoice discounting?

If your SME does not have a robust accounts receivable or debt collections department, Invoice Factoring may be worth it for you. In this instance your funding provider is in charge of chasing payments from your customers. For other businesses, Invoice Discounting may be better suited. 

What are the hidden fees with Invoice Finance?

At ScotPac, we ensure transparency across our fee structure and break down the cost of all of our financial solutions.  

For tailored advice as to how much Invoice Finance or any of our working capital solutions will cost, we recommend speaking to a lending specialist today. 

Is Invoice Finance worth it for startups?

Yes. 

Unlike traditional banks, when ScotPac assesses your business’s eligibility, we look at your holistic business rather than just on your credit score. If your startup has sufficient monthly turnover ($10,000 or more) and creditworthy customers, Invoice Finance may be worth it. 

How does Invoice Finance vs a Line of Credit compare?

Both Invoice Finance and a business Line of Credit offer pros and cons. If your cash flow management issues are related to payment terms and late paying clients, Invoice Finance is the more practical, effective and scalable solution. 

Can you access Invoice Finance with other forms of funding?

Yes. 

Many ScotPac clients use a custom combination of finance solutions to ensure ideal cash flow management, enable operations and growth, and achieve their business goals.