How Cashflow Facilities Stack: LOC, Working Capital and Invoice
Stacking cashflow facilities for self-employed business owners
Business Owners Hub
Cashflow Stack · Working Capital · Invoice Finance
How Cashflow Facilities Stack: LOC, Working Capital and Invoice
Most cashflow problems aren't one shape. The right answer is often a stack of two or three facilities, each matched to a different gap profile, with the limits engineered so coverage doesn't overlap and total servicing stays within lender tolerance.
Quick Answer
A cashflow facility stack pairs two or three facilities, each matched to a gap profile, so coverage does not overlap. Common combinations include a line of credit for revolving rhythm, a working capital loan for a defined event, and invoice finance for debtor-driven cycles.
The wholesale distributor with three cashflow problems
Picture a wholesale distributor with mid-seven-figure annual turnover. Their cashflow problem isn't one shape, it's three. There's a recurring weekly outflow for wages and supplier deposits that doesn't match the inflow rhythm. There's a quarterly BAS payment that lands lumpy. And there's a 60-day debtor cycle on their largest customers.
A single facility can cover one of these gap profiles cleanly. It almost never covers all three without either over-borrowing or leaving structural exposure on the table. This is where a facility stack starts to make sense. Each facility is matched to gap profile, and the rule that holds the stack together is non-overlapping coverage.
In deals I've seen across the Business Owners Hub, the operators who get this right run a thin revolving facility for the weekly noise, a fixed-purpose loan for the lump-sum events, and invoice finance only where debtor concentration is high enough to justify it. The operators who get it wrong stack overlapping coverage and end up with idle limits and double-counted servicing.
How the three facility types differ structurally
A business line of credit is revolving. You draw down to an approved limit, repay, redraw. Interest accrues on the drawn balance only. A working capital loan is fixed-purpose. The lender funds a defined gap, you repay on a structured schedule. Invoice finance is debtor-secured. The lender advances against approved invoices and is repaid when the debtor pays.
These are not interchangeable. A line of credit handles drawdown rhythm well but is expensive when sized up to fund a one-off lump-sum event. A working capital loan handles a known event well but is structurally wrong for noisy weekly cashflow. Invoice finance is efficient where most cash inflow is invoiced B2B with concentrated debtors, and adds friction where retail cash sales dominate.
The sequencing rule and non-overlapping coverage
The sequencing rule is simple to state and harder to apply: each facility in the stack covers a distinct gap profile, and the limits don't double-count the same cash event. From the underwriter's seat, the cleanest stacks have a visible coverage map. The line of credit handles weekly volatility. The working capital loan handles a quarterly event with a known repayment date. Invoice finance handles the debtor cycle. This is the primary plus bridge logic at work, where the primary facility carries the bulk and a second facility bridges a specific structural gap.
Stack Passes
- Each facility maps to a distinct gap profile
- Limits sized to the gap, not the maximum offered
- Coverage map visible on a single page
- Servicing ratio fits within commercial tolerance
- One revolving, one fixed-purpose, debtor facility only if customer mix supports it
Stack Fails
- Two facilities sized to the same cash event
- LOC drawn down to fund what the working capital loan was for
- Idle limit on one facility while another is maxed
- Total servicing breaches lender tolerance
- Invoice finance added without debtor concentration to support it
Where this commonly fails is when an operator drew down their LOC for an event the working capital loan was meant to fund, then approached a third lender for something the LOC was already structurally suited to. The lender sees overlapping coverage and reads it as poor cashflow discipline rather than considered facility design.
Stacked facility servicing in practice
When a new facility joins the stack, lenders re-baseline servicing across the existing facilities. This is rarely a simple addition. The credit assessor reads each facility's purpose, drawdown pattern and repayment evidence, then asks whether the combined position is sustainable through normal trading volatility. Limit re-baselining (illustrative) is the term I use for this exercise. A revolving limit that was approved two years ago against a smaller turnover may need to be redrawn at a different size when the third facility joins.
Where this commonly lands well is when each facility's purpose can be defended on a single line. Where it lands poorly is when the operator can't tell the assessor what each facility does that the others don't. Read more on how lenders size working capital limits.
Payday Super and the new sequencing pressure
From July 2026, employer super contributions move to a per-pay rhythm under the Payday Super framework. The quarterly super remittance buffer disappears. For most SMEs this compresses the cash conversion cycle by several weeks across the year, and it changes the timing assumptions baked into existing facility limits. Operators with a stacked facility design that already separates weekly rhythm from quarterly events typically adapt with limit adjustments. Operators carrying a single oversized facility often need to redesign.
The ATO publishes guidance on BAS lodgement and payment timing, which intersects directly with how a cashflow stack ladders around quarterly obligations. The sequencing rule still holds: each facility serves a distinct gap, limits are sized to the gap, and coverage doesn't double up. What changes is that the weekly facility tier carries a slightly larger share of the work, and the quarterly facility tier may shrink as the BAS rhythm tightens.
A facility stack works when each facility is matched to a different gap profile, limits are sized to the gap rather than the maximum offered, and total stacked facility servicing fits within commercial tolerance. It fails when overlapping coverage masks idle limits or when the operator can't articulate what each facility is doing. The sequencing rule is the discipline that turns three facilities into one coherent design rather than three competing claims on the same cashflow.
Key takeaway: Size each facility to the gap it covers, not to the maximum the lender will write.Frequently Asked Questions
Running a line of credit and a working capital loan at the same time is common practice for SMEs with a mixed cashflow profile. Lenders generally approve the combination provided each facility is matched to a distinct gap profile and the total stacked facility servicing fits within commercial debt servicing tolerance.
The cleanest applications show a clear coverage map: the LOC handles the weekly drawdown rhythm and the working capital loan funds a defined event. See the working capital and business line of credit glossary entries for the structural distinction.
Stacking business cashflow facilities means deliberately combining two or more finance tools so each one covers a different gap profile and the coverage does not overlap. The rule of thumb is one revolving facility for ongoing rhythm, one fixed-purpose facility for known events, and a debtor-driven facility like invoice finance where the customer mix supports it.
Limits are sized to the gap, not to the maximum the lender will offer. A stack with three over-sized limits looks worse to a credit assessor than a tight stack with two well-sized limits.
Lenders will approve a third facility on top of two existing ones where the third facility addresses a distinct gap and the stacked debt servicing remains within tolerance. From the underwriter's seat, the question isn't only whether the borrower can afford the new repayment, it's whether the third facility is doing work the existing two aren't already doing.
Limit re-baselining typically applies when a new facility joins the stack. Read more on the credit assessment process.
Whether invoice finance comes before or after a line of credit depends on the customer mix. Invoice finance is structurally efficient where the majority of cash inflow comes from approved B2B invoices with concentrated debtors. A line of credit is more flexible where cash inflow is mixed or where retail sales dominate.
Many operators run both, sized to non-overlapping coverage rather than duplicating each other. See our guide on how lenders size working capital limits for the sizing logic.
Payday Super, the per-pay employer super contribution rhythm starting from July 2026, compresses the cash conversion cycle for most SMEs by removing the quarterly remittance buffer. Operators with a stacked facility design that already separates weekly rhythm from quarterly events typically adapt with limit adjustments rather than a wholesale restructure.
Operators carrying a single oversized facility may need to redesign the stack. The Business Owners Hub tracks this transition and the cashflow design responses we're seeing.
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