What Is Debtor Finance? How a Whole-Ledger Facility Works
Invoice and Trade Finance
Debtor finance · Whole-ledger facility · Invoice and trade finance guides
Debtor finance turns a whole ledger of unpaid B2B invoices into a facility that moves with your sales. This guide explains how the limit is set and reviewed, which invoices qualify, what a disclosed facility changes for your customers, what it costs on a worked ledger, and how to leave or move funders.
Quick Answer
Debtor finance is a facility that advances most of the value of your unpaid business-to-business invoices, sized on your whole ledger, reviewed as it changes, with the balance released when your customers pay. It suits businesses with recurring sales across several customers and a monthly cash gap.
Also called: debtor financing, invoice debtor finance, receivables finance, whole-of-ledger invoice finance. The four are the same product; "invoice finance" is the umbrella and "factoring" is the disclosed, collections-managed form, both explained in the parent guide.
What is debtor finance, and when does a lender call it that rather than invoice finance?
Debtor finance is a working capital facility that advances funds against your whole ledger of unpaid business-to-business invoices, then releases the balance as your customers pay. A lender calls it debtor finance rather than invoice finance when the facility is sized on your whole ledger and every eligible invoice is assigned; when one invoice is funded on its own, the lender is offering the spot form of invoice finance. The government's plain-language glossary on business.gov.au key financial terms describes factoring as a factor company buying a business's outstanding invoices at a discount and chasing the debtors, and lists it as also known as debtor's finance; it describes invoice finance as finance based on the strength of your accounts receivable where the invoices stay with the business (read 7 October 2026, a government glossary, not product advice).
In Australian debtor finance the words overlap, so the useful test is what the funder is actually offering. Three signals tell you a funder means a whole-ledger, ongoing debtor finance facility:
- The limit is set on the ledger. The funder sizes the facility from your eligible invoices, not from a single invoice or a fixed loan amount.
- Every eligible B2B invoice is assigned. Your whole ledger sits with the funder, not a chosen handful of invoices.
- Availability rises and falls with the ledger. As you raise invoices and customers pay, the amount you can draw moves with them.
The same funder may use other words for related products. "Invoice finance" is the umbrella term for every product that lends against receivables (the glossary definition of invoice finance). "Spot" or single invoice finance funds one invoice at a time with no ongoing facility. Factoring usually means the disclosed form where the funder also manages collections. The parent guide sets out how debtor finance compares with factoring and discounting. If a whole-ledger facility sounds like your situation, you can speak to a broker about a facility.
How does a whole-ledger debtor finance facility work from week to week?
Money moves twice on a debtor facility: the funder advances part of each invoice when you raise it, then releases the balance, less fees, when your customer pays. Week to week, a running facility follows the same cycle:
- Invoices are raised and uploaded. You issue invoices as normal and upload them, or some funders sync them from your accounting software.
- The funder verifies and advances. Eligible invoices are checked and the agreed percentage, the advance rate explained here, becomes available to draw.
- Your customer pays on normal terms. On a disclosed facility the payment goes to the funder's account; on a confidential facility it goes to your own account under the funder's control rules.
- The funder releases the balance. Once the invoice is paid, the retained portion comes back to you less the funding fee.
- A line fee runs on the limit. Most facilities charge a line or service fee on the facility limit as well as a fee on funds drawn.
- Availability is recalculated. As invoices age, get paid or are credited, the amount you can draw is reset, often daily.
The figure that matters each week is not the limit but the availability: what you can draw today against invoices that still qualify. Funders read your ledger closely before and during the facility; the detail is in what a funder reads in your debtor book. The advance band on our panel is set out with its basis in the worked example below.
How is a debtor finance limit set, and how does it move over a year?
The limit is a moving number set by four things: the size of your eligible ledger, how old the invoices are, how much of it one customer owes, and how much of your billing turns into credit notes or disputes. A facility limit is a ceiling; what you can draw on any day is the availability inside it.
Ledger size and eligible balance. The funder starts from your total receivables and strips out anything that does not qualify. What is left is the eligible balance, which some funders call the borrowing base, and the advance applies to that, not to your total sales.
Ageing. Older invoices are worth less to a funder. Typically invoices past 60 days are discounted and invoices past 90 days drop out of availability entirely, which is why one slow payer can shrink your drawable funds without any change to your limit.
Concentration. Where one customer owes a large share of the ledger, the funder caps how much of that customer it will fund; the mechanics are covered in how a concentration limit caps one customer, and the sizing effect in why your top three debtors set the limit.
Dilution. Credit notes, returns and disputed amounts reduce what the funder actually collects. Funders look at your historical dilution rate and hold a reserve against it.
Seasonality and review. Availability is commonly recalculated as often as daily or monthly, with a formal annual review. Review triggers can bring that forward: a lost customer, a top debtor paying late, a jump in disputes or a change in your financials. Seasonal limits are common where sales swing through the year. In our experience a cut rarely arrives as a letter reducing the limit; it more often shows up as a reserve being raised or a debtor being made ineligible, so availability falls first.
| Driver | What the funder measures | How it moves the limit |
|---|---|---|
| Ledger size | Eligible invoice balance after exclusions | The limit tracks the balance, so a quiet month lowers availability |
| Ageing | Days outstanding by invoice | Invoices past 60 days are discounted, past 90 excluded |
| Concentration | Share of the ledger owed by one debtor | The excess over the agreed cap is not funded |
| Dilution | Credit notes, returns and disputes as a share of sales | A reserve is held back against the historical rate |
| Seasonality | Monthly sales pattern | The limit is set to the trough and reviewed at the peak |
| Debtor quality | The customer's credit standing | Weaker debtors fund at a lower advance or not at all |
Sources: Switchboard lender panel read, 7 October 2026; indicative, varies by funder. For the ranges we have observed across non-bank funders, see observed ranges in the non-bank policy matrix.
How much debtor finance can you get on a $100,000, $250,000 or $500,000 ledger?
At an illustrative 80 per cent advance, a fully eligible $100,000 ledger gives $80,000 of availability, a $250,000 ledger gives $200,000 and a $500,000 ledger gives $400,000, before the facility cap, existing drawings, reserves and fees. The gross ledger is not the number that matters: strip the exclusions first, then apply the advance. If $100,000 of a $500,000 book is ineligible, the remaining $400,000 at 80 per cent gives $320,000, and with $250,000 already drawn the undrawn room is $70,000.
| Gross ledger | Ineligible (assumed) | Eligible ledger | Available at 80 per cent |
|---|---|---|---|
| $100,000 | $0 | $100,000 | $80,000 |
| $250,000 | $0 | $250,000 | $200,000 |
| $500,000 | $100,000 | $400,000 | $320,000 |
Sources: illustrative arithmetic only, no lender, as at October 2026; the advance band and what moves a ledger between the rows are in the worked example.
What must your ledger look like to qualify for debtor finance?
A ledger qualifies when it is made up of business-to-business invoices for goods delivered or work completed, owed by Australian customers, under 90 days old, undisputed and not owed by a related party. Anything outside that line is either excluded from availability or capped.
Which invoices fund in full?
- Business-to-business invoices
- Australian debtors
- Goods delivered or service complete
- Under 90 days old
- Undisputed
- Debtor not related to you
Which invoices are excluded or capped?
- Consumer debtors
- Invoices over 90 days
- Disputed invoices
- Contra accounts, where a customer is also a supplier
- Related-party sales
- Retentions and progress claims
- Invoices raised ahead of delivery
- One debtor above the agreed concentration
Progress claims and retentions under a construction contract are the exclusion that surprises builders most often, because a general invoice funder will not fund them; progress claims need a specialist funder. Contra accounts are excluded because the customer can set off what you owe them against what they owe you, so the funder cannot rely on collecting the full invoice.
Ledgers that tend to fit include wholesalers, labour hire, transport, manufacturers, contractors billing below the progress-claim line, and clinics billing health funds. Before a funder approves the facility it will verify the ledger and supporting records; see the documents a funder verifies.
When should you take a whole-ledger facility instead of funding single invoices?
A whole-ledger facility makes sense once you have recurring B2B sales spread across several customers and a cash gap that comes back every month; a single slow invoice or a one-off cost is usually better handled another way. The setup work, the line fee and the whole-ledger assignment only pay for themselves when the facility is used month after month.
| Facility | What secures it | How the limit is set | Suits | How it ends |
|---|---|---|---|---|
| Whole-ledger debtor finance | All eligible B2B invoices assigned | The ledger, reviewed as it moves | Recurring B2B sales across several debtors | On notice, with payout and PPSR release |
| Selective invoice finance | Chosen debtors or invoices | Per approved debtor | Businesses with one or two strong debtors | Per debtor, no whole-ledger assignment |
| Spot single invoice | One invoice | That invoice's value | A one-off gap | When the invoice is paid |
| Working capital loan | The business, often a personal guarantee | Serviceability from turnover and statements | A known one-off cost | Fixed term |
| Overdraft | The business, sometimes property | Bank serviceability and security | A standing buffer | On demand or review |
Sources: Switchboard, from the lender panel and the linked guides; indicative, varies by funder.
If the gap is one invoice, the mechanics and cost of funding one invoice at a time are covered in their own guide. If you are weighing a facility against a term loan, read invoice finance or a working capital loan for a cash gap, and for the loan side in full, the working capital loans guide.
What changes for your customers on a disclosed facility, and what does confidential cost you?
Your customer sees a letter, not a loan: on a disclosed facility each debtor receives a notice of assignment telling them your invoices are now payable to the funder, and from then on they pay into the funder's account. Confidential costs you stronger financials, more reporting, periodic ledger audits and usually a higher line fee. Nothing else about your trading terms has to change on either form.
A notice of assignment is the document that tells a customer its invoices are assigned to a funder. On a whole-ledger facility it goes to every debtor on the ledger, not only the ones you draw against. For how one is typically worded, see how a notice of assignment is worded.
Five things change for your customers on a disclosed facility:
- They receive a notice of assignment. It names the funder and the new payment details.
- They pay a different account. Remittances go to a funder-controlled account rather than yours.
- They may be contacted about payment. Some funders handle collections or reminders on overdue invoices.
- Their credit may be checked. The funder assesses your debtors, because it is relying on them to pay.
- Invoices carry the funder's details. Payment instructions on your invoices point to the funder.
A confidential facility keeps the funder out of view, and funders often call it whole-ledger invoice discounting, with the disclosed form called whole-ledger factoring; the assignment of your ledger underneath is the same. The conditions are the ones above, and a funder may only offer disclosed where the ledger is smaller, the financials are weaker or one customer dominates the book. For a worked view in a hospitality setting, see confidential or disclosed for a cafe.
How do the available funds and the cost move on a $400,000 ledger?
On an illustrative $400,000 ledger at an 80 per cent advance, around $320,000 is available in month one, and that figure rises and falls each month with new invoices, payments and ageing. The scenario below walks through three months.
| Month | What moved | Eligible ledger | Advance available (80%) | Drawn | Funds released on payment | Fee on drawn funds (illustrative, 2% per 30 days) |
|---|---|---|---|---|---|---|
| Month 1 | Facility opens | $400,000 | $320,000 | $250,000 | $0 | $5,000 |
| Month 2 | New invoices $300,000, paid $250,000 | $450,000 | $360,000 | $300,000 | $50,000 less fees | $6,000 |
| Month 3 | New invoices $250,000, paid $250,000, $60,000 past 60 days excluded | $390,000 | $312,000 | $280,000 | $50,000 less fees | $5,600 |
Sources: illustrative only, no lender, as at October 2026; the fee is shown at the mid-point of the panel's common range and annualised in the scenario above. Actual advance rates and fees vary by funder and by ledger.
From our broking, indicative
Indicative only, from Switchboard's lender panel read on 7 October 2026 and our own broking experience; not a quote or an offer, and the band any one business lands in depends on its ledger.
- Advance: typically 70 to 90 per cent of approved invoice value across our panel. One debtor above around a third of the book, or ageing past 60 days, lands a ledger at the bottom of the band or below it; one debtor above around 40 to 50 per cent of the book with no concentration carve-out agreed is usually declined rather than priced.
- Cost: a discount or funding fee commonly in the range of 1.25 to 3 per cent per 30 days on the amount drawn, plus a line or service fee on the limit. The scenario above shows the effective annual rate that 45 days outstanding produces.
- Speed: a drawdown on an established facility can be as fast as 24 to 48 hours; setting the facility up takes longer because the funder verifies the ledger, registers on the PPSR and, on a disclosed facility, sends notices of assignment.
- What gets a ledger declined or cut, from the broker's seat: consumer debtors mixed in; contra accounts; progress claims under a construction contract offered to a general invoice funder; concentration above the line set out under Advance; invoices raised before the work was finished.
Indicative only, based on our lender panel read on 7 October 2026 and deals we have placed, not a quote or an offer; actual terms vary by lender and depend on your ledger and circumstances at the time of application. Not financial advice.
What should a debtor finance quote itemise?
A quote you can compare itemises every charge and the base it is calculated on, because a lower headline percentage on a larger base or with a high minimum is the dearer offer. Ask for each of these in writing:
- Discount or funding charge and its base: drawn funds, gross invoices or a daily balance, and the period it is quoted per.
- Line or service fee on the limit, and whether it runs on the limit or on the ledger.
- Minimum monthly charge and any minimum volume commitment.
- Establishment, due diligence and audit fees, including the frequency of ledger audits on a confidential facility.
- Default, overadvance and extension charges, and what triggers each.
- Termination, discharge and minimum term, which decide what the exit in the final section costs.
Compare two offers on the same ledger, the same utilisation, the same debtor days and the same exit date, as total dollars charged over the period, not as two percentages.
What does a debtor finance broker do before you sign?
A debtor finance broker, or invoice finance broker, reads your ledger the way a funder will and then takes a scenario to the funders whose policy fits it, so you get an appetite check before you lodge an application. On a whole-ledger facility that read covers the exclusions above, the concentration line, your debtor days and whether a confidential facility is realistic on your financials, because those four things set the limit, the advance band and the fee before any funder is named. The broker then confirms which product shape each funder is pricing, compares the discount fee, line fee, minimum term and exit terms on the same basis, and walks you through the notice of assignment and PPSR steps so nothing arrives as a surprise after signing. A broker should tell you in writing how they are paid on the facility, including any commission from the funder, before you sign; ask if it is not offered.
If the numbers suggest a facility could close your gap, you can check eligibility for a facility before you speak to any funder.
What happens if a customer pays late, disputes an invoice or never pays?
A late payment shrinks what you can draw before it costs you anything else: once an invoice crosses the funder's ageing line it is discounted or excluded, availability falls, and if your drawn balance is then above the new availability you are in overadvance and must pay the difference down or replace the collateral. A credit note, a return, a contra set-off or a dispute has the same effect, because each reduces what the funder expects to collect, which is why the dilution reserve exists.
Who carries an invoice that is never paid depends on recourse. On a recourse facility the unpaid invoice is charged back to you after an agreed period and you repay or replace the funding. On a non-recourse facility the funder takes the credit risk on approved debtors, but the cover is usually limited to the debtor's insolvency and excludes disputes, performance issues and breaches of your warranties, so read what is actually covered rather than the product name. Tell the funder early when a major debtor falls overdue; a funder that hears it from you reads it very differently from one that finds it at the next ledger review, and how funders watch a ledger during the facility explains what they are looking at.
Do you need property security for debtor finance, and what if your bank already holds a GSA?
Property security is not part of the standard structure: a debtor finance facility is secured on the receivables themselves, through the assignment of your ledger and a security interest registered on the PPSR, and a residential mortgage is not a usual condition. Funders commonly ask for directors' guarantees, and some take a general security agreement over the business as well; whether a guarantee puts personal assets at risk depends on its terms, which is a question for your solicitor.
If your bank already holds a general security agreement, the incoming funder will usually need the bank's consent, a release over the receivables or a deed of priority before it advances anything, and this is the most common cause of setup delay. A second registration on the PPSR does not by itself put the incoming funder ahead of the bank, because priority follows the security documents and the order and type of registration, so both financiers need to agree the scope and ranking of their security before you sign a term sheet. The deed and the payout mechanics are in the exit steps below.
How does a debtor finance facility end, and how do you move to another funder?
A facility ends on notice, not on a date: you give the notice your agreement requires, the funder issues a payout figure, and either you or an incoming funder pays it out before the departing funder releases its security. Most agreements carry a minimum term and a termination fee, which are contract terms to read before you sign, not after.
- Give notice. Check the minimum term and notice period in your agreement and give written notice accordingly.
- Obtain the payout figure. It is typically the advances outstanding plus accrued fees plus any termination fee.
- The incoming funder buys out. If you are moving funders, the new funder pays out the departing funder and takes the assignment of your receivables.
- The departing funder discharges its PPSR registration and releases its security. The funder ends its registration by lodging a financing change statement on the PPSR; if a registration remains after payout, you can lodge an amendment demand to have it removed.
- A deed of priority where a bank holds security. If your bank holds a general security agreement, the incoming funder will usually need a deed of priority before it funds.
On the funder's side, the PPSR timing rules say a secured party registering against a company should do so within 20 working days after the security agreement is signed (PPSR, timing rules, read 7 October 2026). That is a lender-side rule, not a deadline for you; it explains why a new funder moves quickly to register once you sign.
If a dispute with a funder cannot be settled directly, AFCA can hear a complaint from a small business, meaning a business with fewer than 100 employees, about a credit facility up to $6.3 million for complaints lodged on or after 1 January 2024, but only where the funder is an AFCA member (AFCA, small business, read 7 October 2026); not every non-bank funder is a member, so ask before you sign. Separately, the unfair contract terms law covers a standard form finance contract where your business has fewer than 100 employees or turnover under $10 million and the upfront price payable does not exceed $5 million (ASIC, unfair contract term protections for small businesses, read 7 October 2026), which is the law a one-sided termination or variation clause is tested against.
A deed of priority is the agreement that ranks a funder's receivables security ahead of an existing bank security. For how one works in an invoice facility, see what a deed of priority does. Moving from a bank facility to a non-bank usually means a broader eligibility read and a different fee structure; who provides invoice and debtor finance in Australia compares the provider types, funder policies differ, and the non-bank lender policy matrix shows how.
Debtor finance lends against your whole ledger of B2B invoices rather than a single invoice or a fixed loan amount. The limit is set from the eligible ledger and moves with ageing, concentration, dilution and seasonality; the exclusions decide what counts; disclosure decides what your customers see; and the exit runs on notice, payout and release of security.
Key takeaway: A debtor finance facility is sized by your ledger, reviewed as it changes, and ended on notice, so the questions to settle before signing are the limit rules, the exclusions, disclosure and the exit terms.Frequently Asked Questions
Debtor finance is a facility that advances a percentage of a business's whole ledger of unpaid B2B invoices and releases the balance when customers pay. It is also called debtor financing, receivables finance or whole-of-ledger invoice finance. For the test that tells you which product a funder means, see when a lender calls it debtor finance.
Debtor finance is one form of invoice finance. Invoice finance is the umbrella term; debtor finance is the whole-ledger, ongoing form; factoring is the disclosed form where the funder also manages collections. The parent guide has the four-product comparison.
A debtor finance limit is calculated from your eligible ledger after exclusions, discounted for ageing, capped for concentration and reserved for dilution, then reviewed as the ledger moves. There is no single formula across funders. The drivers are set out in how the limit is set and reviewed.
The advance on debtor finance is a band set by your ledger, not a fixed rate: a spread ledger with young, undisputed invoices sits at the top of the band, and one dominant debtor or older invoices pulls it to the bottom or below. The panel band and its basis are stated in the practitioner read of the worked example. See what an advance rate measures.
Invoices not eligible for debtor finance include consumer debts, invoices over 90 days, disputed invoices, contra accounts, related-party sales, invoices raised before delivery, and amounts above an agreed concentration cap. Retentions and progress claims are also excluded by general funders; see progress claim finance for builders.
On a disclosed facility your customers will know, because each receives a notice of assignment and pays into the funder's account. On a confidential facility they will not, but confidential usually requires stronger financials, more reporting and ledger audits. See disclosed and confidential facilities compared.
No. Debtor finance is business-purpose finance against receivables, so it sits outside the National Credit Code, which applies where the borrower is a natural person or strata corporation and the credit is wholly or predominantly for personal, domestic or household purposes or residential investment (ASIC, National Credit Code, read 7 October 2026). The business-purpose declaration you sign must be true. Your dispute rights and the unfair contract terms protections are set out in the exit section, and the wider picture in how invoice finance is regulated.
Debtor finance is often available with ATO debt or a weaker credit file where the ledger is strong, because the funder is relying mainly on your customers to pay. An ATO payment plan in place is usually read better than an unmanaged debt, but no outcome is guaranteed and policy varies by funder. See funder policy on ATO debt and credit history.
You get out of a debtor finance facility by giving notice under your agreement, obtaining a payout figure, having it paid out (often by an incoming funder), and having the departing funder discharge its PPSR registration and release its security, with a deed of priority where a bank holds security. Read the minimum term and termination fee before signing. See the exit steps in full.
For a cash gap that recurs because B2B customers pay slowly, debtor finance usually fits better because it grows with your sales; for a one-off known cost, a working capital loan with a fixed term is usually simpler. See the cash-gap comparison.
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