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Invoice finance, explained: What it is and how it works

Ola Polczynski
28 September - 3 min read

Cash flow is the lifeblood of any business, because with poor cash flow it ultimately becomes impossible for any business to function properly. When cash flow becomes tight, many tend to draw on other sources of funds – including banks and personal finances – just to stay on top of their bills. In a 2021 Government-issued Australian business finance study, it was revealed that nearly 50 per cent of businesses applied for finance to maintain healthy cash flow, over 31 per cent have used it for general business growth and 27 per cent have needed it to keep their business afloat. 

Today, banks remain the biggest business lenders, issuing over 90 per cent of SME loans in the past year, but this trend is changing. As economic pressures are forcing banks to tighten their grip on loans, along with rapid market changes and technology advancements, we have seen the rise of new players, like Neobanks and FinTech lenders, which are redefining  the way businesses can access finance. Accessing business funding, such as invoice finance, outside of the banking sector usually means fewer approval barriers, more product options, and often greater payment flexibility.

What is Invoice Finance?

Invoice Financing, sometimes referred to as debtor finance or accounts receivable finance, allows businesses to borrow money against their outstanding invoices. If approved, businesses generally receive up to 85 per cent of the value of their invoices, with the remaining 15 per cent paid upon receipt of payment from the customer. 

This ultimately helps cover the gap between paying suppliers and receiving customer payment, allowing businesses to stay on top of expenses and invest in growth initiatives.

What are the benefits to businesses?

Access to funds as you need them:

Get access to cash as soon as an invoice is raised and strengthen your cash flow. You can receive up to 85 per cent of your accounts receivable ledger quickly, and as your customers pay their invoices, your loan is repaid.

Optimise working capital:

Your business benefits from a more predictable revenue stream, allowing you to take advantage of new investment opportunities that propels growth.

Lower costs without hidden fees:

Accessing invoice finance generally means you only pay interest on the money you have drawn. Your business can even save interest if the invoice is paid back early.

Less risky:

Because your invoices are used as security against the loan, invoice finance doesn’t put you at risk of losing valuable personal assets such as your home.

How does it work?

This process will vary between providers, but using the process at Spenda as an example, once you have made the application and received approval, here’s what happens next: 


You raise an invoice which is delivered to your customer by Spenda.


Your business receives an advance of up to 85% of the invoice value from the lender, generally within 24 business hours.


Your customer pays the invoice in full, on or before the due date, to Spenda.


You then receive the remaining 15% of the invoice value, less any lending fees.

Fund your business growth with Spenda

With Spenda, your business can easily turn invoices into cash, faster*. Our Invoice Finance solution grows with your business and offers you the flexibility to access money whenever you need it. Our  loan values range from $200K to $3m, with zero personal security involved. 

To learn more about our Invoice Finance solution or to make an application, please visit:

*Eligibility criteria applies

This article is for general information purposes only. Consult a qualified financial advisor regarding any changes to or decisions about your business’s finances. 

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Ola Polczynski