Receivables financing is a way in which businesses can gain access to working capital earlier and quicker than waiting for payment from clients on outstanding invoices. But what is accounts receivable financing exactly?

In a nutshell, the way that businesses usually work is by issuing invoices for services or products provided and then receiving payment to settle those invoices from their clients at a later point in time. Depending on the industry and parties involved, this can take some time and the delay leaves the vendor/business with a potential gap in cashflow. This lack of working capital can be debilitating for a business’s continued operations.

Accounts Receivable Financing

To solve this problem, a company may wish to access the payments due to them earlier. This can be facilitated through a funder, such as ScotPac, who provides them with a specified percentage of their due invoices’ amount. There are usually strict terms around this facility arrangement, including a fee for access to the early capital. 

Types of Receivable Finance

There are main categories for this type of financial arrangement. 

Asset-based lending

Asset-based lending is similar to the more traditional form of business lending with pricing relative to the receivables finance. While there are many uses and benefits to this on balance sheet form of lending, although there can be larger fees associated with it is considered an extremely flexible form of funding. 


With traditional factoring, the accounts receivable is sold to the funding provider, enabling early access to the payment of invoices through the funder. Some providers, such as ScotPac, can provide a level of receivables credit support by way of sending out monthly debtor statements, reminder notices and collection calls.. While there are processing fees, there is somewhat more flexibility in tailored factoring solutions. 

Selective receivables finance

This last type of finance works in the same way as ordinary receivable financing, but it offers the company itself the opportunity to select which of its outstanding receivables to receive early payment for. Some benefits of selective financing are that companies can receive the full amount of receivables chosen and–not being on the balance sheet–it is unlikely to cause an effect on lines of credit that are outstanding. 

The Financing Process

Facility Set Up

Your chosen financing company will work with you to assess your funding limit based on your individual business’s risk profile. The facility will then be set up with all of the agreed terms and conditions included for both parties; this includes fees and the percentage of outstanding receivables being financed.

Supply & Invoice

At this stage, the normal course of events takes place and the supplier and buyer exchange goods/services, and an invoice is provided.


The supplier–i.e. Your company–is immediately paid according to the terms in the agreement while the invoice(s) are yet outstanding. 

Invoice Settlement

When the buyer settles the invoice, the financing company or funder receives their due amount. When invoices are not settled by or on their due date both parties may be liable to chase up payment. 

Benefits of Receivables Financing

There are many different advantages for a company looking to access a receivables financing facility. 

1. Better Liquidity

Cash flow shortages and lack of access to working capital can affect a business in many ways and can be at best disruptive and at worst completely debilitating. 

2. Smoother Operations

With access to the capital needed, businesses can ensure that their operations run more smoothly and more efficiently. From managing ongoing manufacturing, fulfilling incoming orders, or just ensuring payroll requirements are met, receivables financing can be very helpful in helping a company grow.

3. Risk Management

Through a factoring facility, receivables finance customers have the benefit of credit control support through their financier. The funder carries out credit control on each invoice, on behalf of their client, sending out statements and chasing payment until it is paid, reducing the risk of non-payment.

4. No Collateral

Due to the fact that receivables financing is considered ‘non-secured’, you are not required to provide bricks and mortar security, such as the family home, to access funding. This makes getting access to working capital quicker and far less stressful than some more traditional methods of business finance. 

5. Short Term

Business loans from banks, for example, are often in effect for the medium to long-term meaning gradual payments and interest charges are incurred for a long time to come. With receivables financing, the term is as short as the invoices’ due dates. 

6. Greater Opportunity

Accounts receivable financing allows businesses to take advantage of more opportunity and grow at a quicker rate. With access to capital, it is significantly easier to reinvest cash into the business and fuel greater growth. 

ScotPac – your financial solutions partner

Whenever it comes to finding a financial solutions provider, there are a few things you need to consider.

1. Capacity
2. Partnerships
3. Social Proof

Here at ScotPac, for example, we work with businesses of all sizes and across any industry in Australia and New Zealand. The breadth and depth of our capability is evidenced by the fact that our clients stay with us for the long term. 

In fact, we don’t view our clients as such at all. They are partners and by building a close and trusted relationship, they see us as partners too in ensuring the growth and success of their company. 

Of course, there’s no need to take our word for it. Our client success stories, testimonials and case studies–not to mention the Google reviews as well–are all testament to the fact that we’ve grown into the largest non-bank lender in ANZ for some very good reasons. 

If you’d like to find out more about our range of working capital solutions, including accounts receivable financing, make sure to contact our team today.