Invoice discounting
Confidential facility; customers do not know about the lender. Borrower retains collection. Suits established businesses with internal AR processes.
- Advance: 80% to 85%
- Cost: 1.5% to 2.5%
Loan type
Invoice finance for New Zealand businesses.
Cash advanced against unpaid B2B invoices, freed up before the customer pays. Indicative 1.5% to 3% per invoice cycle. Suits businesses on 60-90 day customer payment terms.
Last reviewed 5 May 2026
Indicative repayment
Weekly
$6,339/week
$27,471 /month $2,412 total interest
$80,000
$5,000 $500,000
3 months
6 months 5 years
18.00% p.a.
8% (secured) 30% (unsecured)
Indicative only. Not a quote or offer of credit. Actual rates, fees, and repayments depend on the business profile and the lender's decision.
Sending to Prospa
Your $80,000 scenario
3 months at 18.00%. Prospa will ask a few quick questions, then provide a firm quote and funding if eligible.
Redirecting…
Educational
Indicative only. Why we say this
Quick answer
NZ invoice finance basics.
- Cash before payment An indicative 70% to 85% of invoice value is advanced at issue, with the balance on customer settlement, less a fee.
- Two main variants invoice discounting (confidential) and factoring (lender collects).
- Indicative 1.5% to 3% per cycle cost depends on volume, debtor concentration, and recourse arrangement.
- Suits long-cycle B2B best fit for businesses with 60-90 day customer payment terms and reliable debtors.
What it is
A working-capital facility against unpaid invoices.
Invoice finance is a working-capital structure where the lender advances a percentage of the value of unpaid B2B invoices (commonly 70% to 85%) at issue, and pays the balance when the customer settles, less a fee. The cash gap between invoice issue and customer payment is the friction the product solves.
The two main variants are invoice discounting (the borrower retains customer relationships, customers do not know about the facility) and factoring (the lender takes over collection and customers pay the lender directly). Discounting suits established businesses with internal debtor management; factoring suits smaller businesses outsourcing the collection function.
Recourse arrangements vary. Recourse facilities require the borrower to repurchase any invoice the customer ultimately fails to pay. Non-recourse facilities transfer the credit risk to the lender (at higher cost). Most NZ invoice finance operates on full or limited recourse.
Advance
70% to 85%
Cycle
30 to 90 days
Cost
1.5% to 3% per cycle
Recourse
Both options available
Variants
Three NZ invoice finance structures.
Factoring
Lender takes over collection; customers pay the lender directly. Suits smaller businesses outsourcing AR or stretched on collection capacity.
- Advance: 70% to 80%
- Cost: 2% to 3%
Selective (single-invoice)
Per-invoice facility; not all invoices financed. Suits businesses with occasional cash-flow gaps tied to specific invoices.
- Advance: 75% to 85%
- Cost: 1.5% to 3%
Vs alternatives
Invoice finance vs line of credit vs term loan.
| Feature | Invoice finance | Line of credit | Term loan |
|---|---|---|---|
| Best for | Long customer cycles | Recurring cash gaps | One-off purposes |
| Cost basis | Per invoice cycle | Daily on drawn | Daily on full balance |
| Indicative cost | 1.5% to 3% per cycle | 12% to 20% p.a. | 12% to 25% p.a. |
| Customer awareness | Optional (discounting hidden) | No | No |
| Recourse | Recourse or non-recourse | On the borrower | On the borrower |
| Setup | Specialist process, 2-4 weeks | 1 to 5 days | 1 to 2 days |
Common uses
When NZ businesses use invoice finance.
Manufacturing on B2B
NZ manufacturers selling to retailers or wholesalers on 60-90 day terms.
Wholesalers and distributors
High volume, low margin, structurally exposed to long customer cycles.
Labour hire and staffing
Wages out fortnightly; client billings 30-60 days. Persistent gap.
Engineering and contracting
Project billings on milestones; trades and materials due before settlement.
How it works
Setting up a NZ invoice finance facility.
01
Day 1 to 7
Initial conversation
Conversation with specialist lender (Bibby, ScotPac, Heartland, major-bank invoice finance teams). Define monthly invoice volume, average customer payment days, debtor concentration, recourse preference.
02
Day 7 to 14
Documentation pack
NZBN, business owner ID, last 6 to 12 months business bank statements, P&L (typically 1 to 2 years), aged debtors report, sample invoices and customer master file.
Documents commonly required
- NZBN
- Director ID
- Bank statements (6-12 months)
- P&L (1-2 years)
- Aged debtors report
- Sample invoices
- Customer master file
03
Day 10 to 21
Credit review and debtor analysis
Lender reviews the debtor book, customer concentration, dispute history, and credit profile. Sets advance percentage and fee structure. Negotiation on recourse/non-recourse.
04
Day 21 to 28
Facility setup and integration
Facility documents signed. Integration with accounting software (Xero, MYOB) common. First batch of invoices submitted; advance funds within 24 hours of submission.
Invoice finance setup is materially slower than term loans because the facility is structural rather than transactional. Once live, day-to-day funding is fast (24 hours typical from invoice submission to advance).
Worked scenarios
Three NZ invoice finance scenarios.
Indicative costs and structures across three different NZ businesses using invoice finance.
Staffing
Auckland labour hire firm
A Penrose labour hire business placing 80 contractors per week. Wages out fortnightly ($240K per cycle); client invoices issued weekly, paid 30 to 60 days later. The persistent cash gap drives a structural need for invoice finance.
The structure was a invoice discounting facility, 80% advance, 2% per invoice cycle. Annual cost roughly 2 to 3% of revenue across the year, materially cheaper than the equivalent line of credit on continuously rolled balances.
Indicative figures
- Monthly invoices
- ~$1.0M
- Advance
- 80%
- Fee
- ~2% per cycle
- Annual cost
- ~$240K
- Cash unlocked
- ~$800K
Wholesale and distribution
Hamilton wholesaler
A Te Rapa food wholesaler selling to NZ supermarket chains and independent retailers on 60-day terms. Monthly invoice volume $1.8M. Cash gap structurally embedded in the business model.
The structure was a invoice discounting, 85% advance, 1.7% per cycle. Larger volume secures preferred pricing. Annual cost runs ~$367K against $1.5M working-capital release.
Indicative figures
- Monthly invoices
- ~$1.8M
- Advance
- 85%
- Fee
- ~1.7% per cycle
- Annual cost
- ~$367K
- Cash unlocked
- ~$1.5M
Engineering
Christchurch engineering firm
A Sockburn structural engineering firm running 6-month projects with milestone billings. Selective invoice finance used on individual large invoices ($200K+) where the cash-flow gap creates strain.
The structure was a selective single-invoice finance. 80% advance per invoice, 2.5% per cycle. Used 4 to 6 times per year on the largest invoices.
Indicative figures
- Per-invoice value
- $200K
- Advance
- $160K
- Fee per use
- ~$5,000
- Annual usage
- 4 to 6 invoices
Lenders
NZ invoice finance providers.
Best for specialist invoice finance
Bibby Financial Services NZ
NZ's largest specialist invoice finance lender. Discounting and factoring across SME and mid-market.
Indicative rate band:1.5% to 3% per cycle
Read onBest for mid-market invoice finance
ScotPac NZ
Trans-Tasman specialist; strong on mid-market discounting and selective.
Indicative rate band:1.5% to 2.5% per cycle
Read onBest for NZ-bank invoice finance
Heartland Bank
Heartland's invoice finance product targets established SMEs with predictable AR books.
Indicative rate band:1.7% to 3% per cycle
Read onBest for large-volume facilities
Major banks (ANZ/BNZ)
Major-bank invoice finance available on relationship basis; pricing typically below specialists at scale.
Indicative rate band:1.5% to 2.5% per cycle
Read onTrade-offs
Where invoice finance fits, and where it doesn't.
Where it fits
- B2B businesses with structural long-customer-payment cycles (60 to 90+ days).
- Established businesses with predictable monthly invoice volumes and reliable debtor base.
- Growth-stage businesses where revenue is rising faster than working-capital availability.
- Industries with intrinsic cash-flow gap (labour hire, wholesale, contracting, manufacturing).
- Businesses wanting a working-capital facility that scales automatically with sales rather than requiring re-application.
Where it doesn't
- B2C businesses; invoice finance is a B2B product (customer-side businesses cannot be invoiced for the facility to advance against).
- Businesses with concentrated debtor risk (one or two customers representing >50% of receivables); lenders typically decline these.
- Businesses with high dispute rates or recurring credit notes; the model breaks down where invoices commonly do not pay in full.
- Small invoice volumes (under $50K monthly); fixed setup and admin costs make the facility uneconomic.
- Owner-operators uncomfortable with a third party in the customer-payment chain (factoring particularly).
When it goes wrong
Default and dispute scenarios on invoice finance.
Invoice finance defaults differently to term loans. The facility itself doesn't default; individual invoices fail to pay. Three common scenarios.
Customer non-payment (recourse)
On a recourse facility, the lender advances against the invoice; if the customer fails to pay, the borrower repurchases the invoice. The borrower carries the credit risk.
What happens:Borrower repays the advanced amount plus fees. Cash flow strained on disputed invoices. Persistent customer payment problems can trigger lender review of the facility and tighter advance terms.
Concentration breach
Most facilities cap concentration on a single customer (commonly 25% to 35% of the debtor book). A customer growing past the cap reduces the advanceable balance against that customer.
What happens:Lower effective working-capital release; the structural advantage of the facility erodes. Renegotiation or shifting business mix typically resolves.
Facility recall
On materially deteriorated trading or covenant breach, the lender can recall the facility. Existing advances are typically reconciled against incoming customer payments; unfunded balance becomes a borrower obligation.
What happens:Working-capital facility lost. Borrower needs alternative funding (typically another invoice finance lender or a term loan) within the recall window.
Invoice finance facilities are typically more resilient than line-of-credit or term-loan facilities through cash-flow stress because the lender has direct visibility on customer payments and can adjust advance terms transactionally rather than recalling the entire facility.
What a cycle costs
Indicative cost of invoice finance by settlement speed.
Invoice finance is priced per cycle rather than per annum, which makes it hard to compare against a term loan until the figures are laid out. The fee is charged on the invoice value for as long as the invoice stays outstanding, so the customer payment behaviour, not the headline percentage, decides what the facility actually costs. The table runs a $50,000 invoice at an indicative 2% per 30-day cycle.
| Customer settles in | Indicative fee | Cost on $50,000 | Equivalent annualised | Advance received day one |
|---|---|---|---|---|
| 20 days | 1.3% | $650 | ~24% | $37,500 (75%) |
| 30 days | 2.0% | $1,000 | ~24% | $37,500 (75%) |
| 45 days | 3.0% | $1,500 | ~24% | $37,500 (75%) |
| 60 days | 4.0% | $2,000 | ~24% | $37,500 (75%) |
| 90 days | 6.0% | $3,000 | ~24% | $37,500 (75%) |
| Customer does not pay (recourse) | Fee plus repayment | $3,000 + $37,500 | Not applicable | Advance repayable |
Indicative only, not a quote or offer of credit. Assumes a 2% fee per 30-day cycle charged pro rata and a 75% advance rate. Actual fees, advance rates and recourse terms are set by the lender after assessment, and many facilities also carry a service or administration fee separate from the discount fee.
Recourse
On a recourse facility the credit risk stays with the business.
Most New Zealand invoice finance is written with recourse, which means that where the customer does not pay within an agreed period, commonly 90 days, the business repays the advance. The facility is buying time, not transferring the risk of a bad debt. Non-recourse facilities exist and shift that risk to the lender or an insurer, and they price accordingly, commonly at a materially higher fee and with the lender assessing each customer rather than the business. Reading which of the two is on offer is the single most important thing to establish before signing, because the two products look almost identical on a rate sheet and behave very differently when a customer fails.
Common pitfalls
Six things that catch NZ businesses on invoice finance.
Invoice finance is the product most often misunderstood at signing, largely because the pricing model is unlike anything else on this site.
Reading the fee as annual
A 2% fee per 30-day cycle is not 2% per annum. Sustained across a year of 30-day cycles it is closer to 24%, which is the figure to compare against a term loan.
Disclosed versus confidential
A disclosed facility notifies customers that invoices are assigned and payments redirect to the lender. Some businesses find that changes a client relationship. Confidential facilities exist and typically cost more.
Concentration limits
Where one customer represents most of the ledger, lenders commonly cap the proportion they will fund. A business with two large clients may find far less of its invoice book is eligible than it expected.
Disputed invoices are excluded
An invoice in dispute is generally pulled from the facility and the advance becomes repayable. On project work where variations are contested as a matter of course, that can withdraw funding at the worst moment.
Minimum volume commitments
Whole-ledger facilities commonly carry a minimum monthly fee or a committed volume. A quiet quarter still costs the minimum, which turns a variable product into a fixed one.
Exit and notice periods
Facilities commonly run on a 12-month term with a notice period to exit. Unwinding takes time because the ledger has to run down, so it is not a facility that can be switched off in a week.
Eligibility
What makes an invoice ledger fundable in New Zealand.
Invoice finance assesses the debtor book more than the borrower, which is what makes it available to businesses that would price poorly on an unsecured term loan. A young company with a thin balance sheet and three blue-chip customers on 60-day terms is a stronger application here than a longer-established business invoicing consumers.
Business-to-business invoicing is close to a hard requirement. Consumer invoices, cash sales and payments taken at point of sale are generally not fundable, because there is no creditworthy third party standing behind the receivable.
The invoice has to be for work already completed and not in dispute. Progress claims are commonly fundable where the contract provides for them, but work in progress, deposits and prepayments generally are not, because the obligation to pay has not yet crystallised.
Lenders look at the ledger quality closely: how concentrated it is across customers, the average days to settle across the last year, the dilution rate from credit notes and disputes, and whether any customers are already in arrears. A ledger with a long tail of small reliable payers is generally easier to fund than a short list of large slow ones, even where the total is identical.
Minimum turnover thresholds commonly start around $250,000 annually for a whole-ledger facility, though single-invoice and selective products in the New Zealand market reach smaller businesses at a higher per-cycle cost. Trading history matters less here than on most other products, because the assessment leans on who owes the money rather than on how long the business has been invoicing them.
The two shapes
Whole-ledger facilities and selective invoice finance.
Whole ledger
The full debtor book, funded continuously.
The lender takes an assignment over the entire sales ledger and advances against it as invoices are raised. The facility becomes the working-capital engine of the business, and the cash position stops tracking customer payment behaviour altogether.
Pricing is generally lower per dollar funded because the lender has volume and visibility. The trade is commitment: a 12-month term, a minimum monthly fee, and commonly a disclosed arrangement where customers are notified.
This shape suits businesses where the payment cycle is structural rather than occasional, and where the administrative saving of handing collections to the lender is worth something on its own.
Selective
Individual invoices, funded on demand.
Also called single-invoice or spot finance. The business chooses which invoices to fund and when, with no obligation to put the rest of the ledger through the facility.
The per-cycle fee is generally higher, and approval can be per invoice rather than per facility, which introduces some uncertainty about whether a given invoice will be funded. There is usually no minimum volume.
This shape suits a business with one large invoice creating a temporary problem, or seasonal spikes where the ledger is otherwise manageable. Several New Zealand providers operate in this segment specifically, and it is the more common entry point for smaller businesses, partly because it can be tried on a single invoice without committing the whole ledger or signing a twelve-month term. Businesses commonly start here, establish whether the mechanics suit how they invoice and how their customers react, and move to a whole-ledger facility later once the volume justifies the lower per-cycle pricing.
Worked example
A Napier labour-hire firm funding a 60-day payment cycle.
The firm places industrial and warehousing staff with three large food-processing clients. Wages go out weekly without exception. The clients pay on 60-day terms that in practice settle nearer 70 days. The gap between paying a worker and being paid for that worker is roughly ten weeks, and it is structural rather than occasional, which is the shape invoice finance exists for.
At around $340,000 of invoices outstanding at any time, a whole-ledger facility advancing 80% releases roughly $272,000 against the book. On these assumptions, at an indicative 2.2% per 30-day cycle charged pro rata against an average 68 days to settle, the annual cost lands near $17,000 on a ledger turning over about $1.8M.
The comparison the firm ran was against a $270,000 term loan at an indicative 14%, which would have cost close to $37,800 in year-one interest and required security the business did not have. The facility also grows with the ledger, so a new client contract funds itself rather than requiring a fresh application.
The exposure worth naming is concentration. Three clients means the lender caps how much of any single debtor it will fund, and the loss of one client would reduce the available funding at the same moment it reduced revenue. The facility is written with recourse, so a client failing to pay leaves the advance repayable by the firm.
Indicative figures, year one
- Annual ledger turnover
- ~$1.8M
- Average outstanding
- ~$340,000
- Advance rate
- 80%
- Cash released
- ~$272,000
- Average days to settle
- ~68
- Indicative annual cost
- ~$17,000
- Term loan equivalent
- ~$37,800 interest
Indicative only, based on the assumptions stated above. Actual cost depends on the fee structure, the advance rate, how quickly each customer settles and any minimum monthly charge in the facility.
How it runs day to day
What changes inside the business once a facility is live.
Invoice finance is the only product on this site that changes an internal process rather than just a bank balance. Invoices are uploaded to the lender platform as they are raised, commonly with the delivery docket or signed timesheet attached as proof the work was completed, and the advance lands within a day on most New Zealand facilities.
Where the arrangement is disclosed, the invoice carries an assignment notice and the customer pays the lender directly. Collections then sit with the lender, which removes an administrative burden and also removes a point of contact. Businesses that use the collections call as a relationship touchpoint sometimes find that a real loss, and it is worth deciding deliberately rather than discovering it after the first cycle.
Reconciliation changes shape too. Two amounts arrive against each invoice, the advance at issue and the balance at settlement less the fee, so the accounting treatment is more involved than a single receipt. Most providers supply a reconciliation file, and setting the bookkeeping up correctly in the first month saves considerable unpicking later.
The ledger is reviewed continuously rather than at renewal. Where a customer starts paying more slowly, the lender commonly reduces the funding available against that debtor before the business has registered the change, which is a useful early signal as well as an occasional inconvenience.
Before signing
Four questions that separate two facilities quoting the same fee.
Is the facility recourse or non-recourse, and if recourse, how many days before an unpaid invoice becomes repayable? Is it disclosed to customers or confidential? Is there a minimum monthly fee or a committed volume, and what does a quiet quarter cost? And what is the notice period to exit, given the ledger has to run down before the facility can close? Two New Zealand providers quoting an identical discount fee can differ substantially once those four are answered, and none of them appear on a rate comparison.
References
Sources
- Bibby Financial Services NZ
Indicative invoice finance pricing reference.
- ScotPac NZ
Trans-Tasman specialist.
- IRD: GST on invoice finance
GST treatment of invoice finance fees and advances.
- Reserve Bank of NZ
NZ trade credit and working capital statistics.
- PPSR (NZ)
Where invoice finance security interests are registered.
FAQ
Invoice finance, NZ small-business questions answered
What is invoice finance?
Invoice finance is a working-capital structure where the lender advances a percentage (commonly 70% to 85%) of the value of unpaid B2B invoices at issue, and pays the balance when the customer settles, less a fee. It frees up cash trapped in long-customer-payment cycles.
How is invoice finance different from a loan?
A loan is a fixed sum repaid on a fixed schedule. Invoice finance is structural, scaling automatically with invoice volume, with each invoice cycle creating its own short funding event. The facility is funded by the customer payment rather than from cash flow generally.
What is the difference between invoice discounting and factoring?
Invoice discounting is confidential; the borrower retains customer relationships and collection responsibility. Factoring transfers collection to the lender; customers pay the lender directly. Discounting suits established businesses; factoring suits smaller businesses outsourcing the AR function.
How much does invoice finance cost?
Indicative cost runs 1.5% to 3% per invoice cycle on the advanced amount. Annual cost depends on cycle length, advance percentage, and debtor concentration. As a rough indicative, expect 2 to 3% of annual invoice volume as the total facility cost.
How fast does invoice finance fund?
Once the facility is set up, invoice submissions typically advance within 24 hours. Initial setup is materially slower (2 to 4 weeks) because the lender reviews the debtor book, integrates with accounting software, and documents the facility.
What is recourse vs non-recourse?
Recourse means the borrower repurchases any invoice the customer fails to pay (the borrower carries the credit risk). Non-recourse transfers the credit risk to the lender (at higher cost). Most NZ invoice finance operates on full or limited recourse; non-recourse pricing typically runs 0.5 to 1 percentage point higher per cycle.
Can sole traders or contractors use invoice finance?
Yes, where the business issues B2B invoices on standard payment terms. Volume minimums apply (commonly $50K monthly invoice volume) because of fixed setup costs. Contractors invoicing one or two large customers may struggle on concentration limits.
Will my customers know I use invoice finance?
On invoice discounting, no. The facility is confidential and customers continue paying the borrower. On factoring, yes; customers pay the lender directly. The discounting structure exists because many businesses prefer the customer relationship not to be visibly involved with a finance provider.
Is invoice finance interest tax-deductible?
Invoice finance fees and interest are generally deductible against business income, subject to the accountant's confirmation. The fees are typically classified as financing costs rather than ordinary expenses.
What happens to disputed invoices?
Disputed invoices are typically excluded from the advanceable balance until resolved. On recourse facilities, an unresolved dispute that ages past the agreed window triggers the borrower buying back the advance.
Can I use invoice finance alongside other debt?
Yes. Invoice finance is structurally compatible with term loans and lines of credit, particularly because the security interest is over the receivables rather than overlapping with general business assets. Coordination across multiple lenders is required to ensure the security positions do not conflict.
What is the minimum monthly invoice volume?
NZ specialist lenders typically require $50K monthly invoice volume as a minimum because fixed setup and administration costs make smaller volumes uneconomic. Some major-bank facilities target larger volumes ($300K+ monthly).
Related
Related reading
Working capital loan
The term-loan alternative for one-off cash gaps.
Read onBusiness line of credit
The general-purpose alternative for recurring cash gaps.
Read onManufacturing
NZ manufacturers commonly use invoice finance.
Read onMarketing agency loans
30 to 90 day client payment lag is a textbook invoice finance use case.
Read onTrucking and haulage loans
Settlement-lag working capital across freight invoicing.
Read on