Two of the most popular cash flow solutions for Australian SMEs are invoice finance and business overdrafts. Both solve the same fundamental problem - you have money owed to you but you need cash now - but they work in very different ways.
This article breaks down exactly how each product works, who each suits, and how to decide which is right for your business.
Invoice finance (also called debtor finance or accounts receivable finance) lets you borrow against outstanding invoices. Instead of waiting 30, 60 or 90 days for clients to pay, you can access up to 80–90% of the invoice value within 24–48 hours of raising the invoice.
The lender pays you the advance. When your client pays the invoice, the lender takes back the advance plus their fee. You receive the remaining balance.
Example: You raise a $100,000 invoice. The lender advances $85,000 (85%). Your client pays in 45 days. The lender takes $85,000 plus a 2% fee ($2,000). You receive the remaining $13,000.
A business overdraft is a revolving credit facility with an approved limit. You draw funds when you need them, repay when cash comes in, and draw again. You pay interest only on what you use. It is not tied to specific invoices - it is a general-purpose cash flow buffer.
| Feature | Invoice Finance | Business Overdraft |
|---|---|---|
| Based on | Your outstanding invoices | Your monthly revenue |
| Limit grows with | Invoice volume | Business growth |
| Tied to specific invoices | Yes | No |
| Suits businesses with | Large B2B invoices | Any revenue type |
| Typical cost | 1.5–3% per invoice | 14–30% p.a. interest |
| Setup time | 1–3 days | 1–24 hours |
| Tax returns required | Sometimes | No |
| Property security | Not usually | Not under $150K |
Key insight: Invoice finance works best for B2B businesses with large, slow-paying invoices. Business overdrafts work best for everyone else.
Yes - and many businesses do. A business overdraft provides a general cash flow buffer while invoice finance handles specific large invoices. Used together, they give you maximum flexibility.
Talk to an OverdraftMe broker. We compare both products across 50+ lenders and recommend what suits your situation - free of charge.
Get a free assessment →It depends on how you use it. Invoice finance fees of 1.5–3% per invoice can be cheaper than overdraft interest if you repay quickly. But if invoices take 60–90 days, the effective annual rate can exceed 30%.
In disclosed invoice finance, your clients are notified that their invoice has been assigned to a lender. In confidential invoice finance, they are not. Most SMEs prefer confidential arrangements.
A business overdraft can be approved and funded in as little as 24 hours. Invoice finance typically takes 1–3 days for setup but can then fund individual invoices same-day.
Everything you need to know about business overdrafts - eligibility, rates, lenders, how to apply and the Payday Super changes in 2026. Free to download.
Download the free guide →