If you’ve ever found yourself staring at a stack of unpaid invoices while juggling payroll, supplier bills, and a growing to-do list, you’re not alone. For many Australian businesses, the gap between delivering work and getting paid is one of the most frustrating parts of running a company.
Debtor finance is a way to unlock the money tied up in your invoices and put it to use immediately. It’s not a loan, you’re not borrowing against future earnings or offering up property as collateral. You’re simply accessing the capital you’ve already earned, faster.
In this blog, OptiPay will explore what debtor finance actually is, how it works, and whether it’s something that could support your business growth.
Table of Contents:
- What is Debtor Finance?
- How Does It Work?
- Factoring vs. Discounting
- Is Debtor Finance Right for You?
- Blog in Summary
What is Debtor Finance?
Think of debtor finance as a way to fast-track the working capital from your invoices. Instead of waiting for your customers to pay on their terms, a finance provider gives you access to most of that capital immediately. You get the working capital you need, and when your customer eventually pays, the provider releases the remaining balance to you, minus an agreed upon fee.
Your accounts receivable ledger becomes the asset. It’s the value you’ve already created; only debtor finance lets you properly leverage it.
The more invoices you issue, the more funding becomes available. It’s dynamic and responsive, growing alongside your business.
Unlike traditional loans, there’s no need to offer up property or personal assets as collateral. The security is in the invoices themselves. That’s a big win for business owners who want to keep their personal finances separate or who don’t have bricks-and-mortar assets to offer.
How Does It Work?
The process is surprisingly simple. Here’s how it typically works: you deliver your product or service to another business and issue an invoice, just like you normally would. Instead of waiting for the customer to pay, you send that invoice to your debtor finance provider, or signal for them to receive it automatically through their integrated system in your payroll.
Once verified, they advance you up to 90% of the invoice value. You now have cash in hand to cover wages, buy inventory, or invest in marketing. Your customer still pays the full invoice amount on the original terms.
Once the payment is received, the provider sends you the remaining amount, minus their fee. You only pay for what you use, and there are no fixed repayments. The facility settles itself when your customer pays.
Factoring vs. Discounting
There are two main styles of debtor finance: factoring and discounting. The difference comes down to who handles the collections and whether your customers know you’re using a finance facility.
With factoring, the provider takes over the invoice and the collections process. Your customer pays them directly, and they manage the follow-up. This is a disclosed arrangement, meaning your customer is aware of the setup. It’s a great option for smaller businesses that don’t have a dedicated accounts team or prefer to outsource the admin.
With discounting, you retain control. You’re simply borrowing against the invoice, and your customer pays you as usual. The finance provider stays in the background.
This is a confidential arrangement and is often preferred by businesses that want to keep their funding strategy private.
Both options have their place. It really depends on how you manage your customer relationships and what kind of internal resources you have.
Is Debtor Finance Right for You?
Debtor finance isn’t a one-size-fits-all solution, but it’s a terrific tool for the right kind of business. If you sell to other businesses and offer payment terms, you’re already sitting on a pool of working capital, debtor finance helps you access it.
It’s especially useful for businesses that are growing quickly. As your sales increase, so does your need for cash to fund operations. You don’t need to renegotiate limits or go through lengthy approval processes. The facility grows as your invoice volume grows.
It’s also a smart option if you want funding that doesn’t rely on property. Many SMEs don’t have real estate to offer as collateral, or they prefer not to tie up personal assets. Debtor finance gives you access to capital without those strings attached.
And if your business experiences seasonal highs and lows, debtor finance can help smooth out the bumps. During busy periods, you can access more funding. During quieter times, the facility naturally adjusts. It’s flexible, responsive, and built to match the pace of your business.
Blog in Summary
Debtor finance is a flexible funding solution that allows Australian B2B businesses to unlock the money tied up in unpaid invoices and put it to work immediately. For companies that extend payment terms to their customers, the waiting game can be exhausting and often restricts growth.
Debtor finance bridges that cash flow gap, giving business owners fast access to working capital so they can pay staff, cover supplier costs, and invest in opportunities.
It is particularly suited to SMEs that are scaling quickly or dealing with seasonal fluctuations. As sales increase, the facility grows in line with invoice volume, meaning your access to funds expands naturally with your business.
With options such as factoring, where collections are managed for you, or discounting, which keeps the arrangement confidential, debtor finance can be tailored to fit the way you operate and the relationships you want to maintain with your customers. This flexibility makes it a responsive tool for businesses that need funding to their resources.
For many business owners, the real benefit lies in the financial stability it brings. When cash flow is stable, you can plan ahead, take on larger contracts, and pursue growth without the constant worry of when invoices will be paid. Debtor finance turns receivables into usable capital, helping businesses move from surviving to thriving.
If you are ready to explore how debtor finance could support your business, OptiPay is here to guide you through the options and help you turn your invoices into growth capital.
