Invoice discounting is a commercial finance facility that advances cash against a business’s unpaid business-to-business invoices while the business keeps managing and collecting its own debts. Customers usually never know the facility exists, which is why it is often called a confidential facility.
For a brokerage with commercial clients, it fills the gap between issuing an invoice and getting paid, and it can sit naturally alongside equipment finance or business lending in the same conversation. It is also a specialist product with its own pricing, eligibility and appointment rules, so it deserves more than a passing referral.
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How invoice discounting works
The funder takes a registered security interest over the business’s invoices and advances most of their value up front. When the customer pays, the remaining balance is released minus the funder’s fees. Because collections stay in-house, the facility suits businesses with disciplined debtor management and customers who would be spooked by a third party chasing payment.
The close cousin is invoice factoring, where the arrangement is disclosed and the funder collects the debts directly. Discounting protects the client relationship; factoring outsources the collection work. Choosing between them starts with asking whether the business wants its customers to know a funder is involved.
Facility sizes and the current market
Australian specialists dominate this market. ScotPac’s public material currently markets advances up to 85 per cent of invoice value with facilities scaling into the millions, while ASX-listed Earlypay distinguishes confidential discounting from disclosed factoring and cites facilities from around $50,000 into the multi-millions with advances typically near 80 per cent. Those figures are snapshots that change with funder policy, so confirm current terms before quoting them to a client.
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Before you take an enquiry further, check what your aggregation group supports commercially; some groups, such as choice, maintain commercial panels that include working-capital funders, and accreditation requirements differ from residential lending.
Who qualifies
Eligibility turns on the invoices more than the borrower. Funders want business-to-business sales on standard payment terms, debtors with acceptable credit quality and a business trading long enough to show a pattern. The directors’ own credit history still gets reviewed, but a strong debtor ledger can carry an application where a consumer-style score would not.
The application and funding sequence
The application process runs differently from a home loan. Expect a proposal covering the debtor book, a schedule of recent invoices, company searches and registration of a security interest on the Personal Property Securities Register. Once the limit is set, the business draws against approved invoices as it issues them, and each draw lands within days rather than weeks.
Pricing, repayments and the fine print
Invoice-finance pricing combines a discount margin on the funds used with administration or line fees, so it behaves differently from the standard variable interest rates brokers quote on home loans every day. Repayments happen automatically as customers settle. Watch for minimum utilisation clauses, audit rights, concentration limits on single debtors and what happens if a customer pays late or disputes an invoice, because those terms decide whether the facility helps or strains the business.
Two duties sit on the broker. Commercial invoice finance generally falls outside the National Credit Code, so document a written commercial appointment rather than relying on consumer-credit processes, and keep any tax treatment questions with the client’s accountant.
If you are weighing up whether to add this to your service mix, ask two funders for their current advance percentages, fee schedules and debtor-concentration rules, then test one small facility end to end before you promise turnaround times. Vendor Case studies are useful prompts for those questions, but your first settled deal is the only result that counts.
