The short version
Working capital finance covers the gap between money going out and money coming in: the wages, stock and supplier bills that fall due before your customers pay you. There are three main ways to fund that gap in Australia, and they suit very different businesses.
- Invoice (debtor) finance advances up to around 85% of your unpaid invoices within a day or two, and grows as your sales grow. It usually needs no property security.
- A line of credit or overdraft gives you a revolving limit you draw on as needed, so you pay interest only on what you use.
- A working capital loan is a fixed lump sum assessed against the business and repaid over a set term. It is fast and often unsecured, but priced for that.
Which one fits depends on whether your cash gap tracks your invoices, is unpredictable, or is a one-off. This guide explains each, what it costs, and how to choose.
What working capital finance actually solves
Profitable businesses still run short of cash. You pay staff, suppliers and rent on a fixed cycle; your customers pay you on theirs, often 30, 60 or 90 days after you have done the work. The bigger the gap, and the faster you grow, the more cash gets tied up in that timing mismatch. Working capital finance funds the gap so the business keeps moving.
This is not money for buying an asset (that is asset finance) or property (a commercial mortgage). It is short-term funding against the operating cycle itself.
Invoice and debtor finance
Invoice finance, also called debtor finance, releases the cash locked up in invoices you have already issued. The financier advances a percentage of each invoice now and pays you the balance, less a fee, when your customer settles.
Typically you can draw up to around 85% of the invoice value within 24 to 48 hours of issuing it. The fee usually sits in the order of 2 to 4% of the invoice, depending on your volume, the quality of your customers, and how long they take to pay. The invoices themselves are the security, so this rarely needs property. That is what makes it suit a growing business without spare real estate to pledge.
It comes in two shapes: confidential invoice discounting, where you keep managing your own collections, and factoring, where the financier manages them. The facility scales with your sales, so you fund more as you invoice more. That makes it a natural fit for a business whose cash gap is driven by its debtors. The full picture sits on the invoice and debtor finance page.
Lines of credit and overdrafts
A line of credit is a revolving limit you draw on as needed and repay as cash comes in. You pay interest only on the balance you have actually drawn, not the full limit, which is what makes it suited to an unpredictable or seasonal cash gap.
An overdraft is the same idea attached to your transaction account. A standalone line of credit does the same job without being tied to the account, and can carry a larger limit. Both can be secured against property for a sharper rate, or left unsecured at a higher one. How lenders size the limit is covered on the lines of credit page.
Working capital loans
A working capital loan is a fixed lump sum, assessed against the trading business rather than a specific asset, and repaid over a set term. Unsecured options can settle in days, because the lender underwrites the cash flow rather than a property valuation. The trade-off is price: a fast, unsecured facility is rated for the risk the lender is taking. It suits a defined, one-off need, like a stock buy-up before a busy season or covering a tax bill, rather than an ongoing gap. The cashflow finance page sets out the lender categories and structures.
Invoice finance vs a working capital loan
The honest difference is what the facility is tied to. Invoice finance scales with your sales and is secured by your debtors. A working capital loan is a fixed amount assessed against the business and repaid on a schedule, regardless of your invoicing. If your cash gap grows every time you win more work, invoice finance grows with it. If you have a specific, bounded need, a loan is cleaner. Neither usually requires property, which is the point of both for an owner who does not want to pledge the family home.
Line of credit vs overdraft
Both are revolving and both charge interest only on what you draw. The practical difference is that an overdraft is bolted to your transaction account and usually capped lower, while a standalone line of credit can be larger and sit independently of day-to-day banking. For a small, occasional buffer an overdraft is simplest; for a meaningful, ongoing facility a line of credit usually gives more room.
How to choose
There is no single best option. The right structure follows the shape of your cash gap.
- If the gap tracks your invoices and grows with sales, use invoice or debtor finance.
- If it is unpredictable or seasonal, a line of credit or overdraft means you pay only for what you use.
- If it is a defined, one-off need, a working capital loan with a fixed term is cleaner.
Cost is rarely just the headline rate. Fees, the advance percentage, and how long your customers take to pay all move the real number, which is why the true cost of a business loan is worth reading before you compare offers. Lender appetite for each of these varies widely, and the categories of business lender that fund working capital are not the same ones that fund property.
The regulatory frame
Working capital finance for a business is commercial-purpose lending, which sits outside the consumer protections of the NCCP framework. The responsible-lending and disclosure rules that apply to consumer credit do not automatically reach it. What does apply is the broker's own disclosure: how Aurelius Capital is paid, and any fee charged to you, is set out in writing in the Credit Guide before you commit. Aurelius Capital is a credit representative (560751) of Viking Money Pty Ltd under ACL 471435 (Viking Aggregation Pty Ltd), and disputes can be taken to AFCA.
If you want a broker's read on which of these fits your cash cycle, and what it would actually cost, the application form is the place to start.