Working capital is the fuel that keeps a business running day to day. Working capital finance is the mechanism that ensures that fuel never runs out - even when clients pay late, seasons slow down or unexpected costs arise.
This guide covers every aspect of working capital finance for Australian SMEs.
Working capital is the difference between your current assets (cash, receivables, stock) and your current liabilities (wages, supplier invoices, rent). Positive working capital means your business can meet its short-term obligations. Negative working capital means it cannot - even if the business is profitable on paper.
Working capital formula: Current Assets − Current Liabilities = Working Capital
Example: $80,000 in the bank + $50,000 owed by clients − $100,000 in bills due = $30,000 working capital
The most flexible and commonly used working capital tool. A revolving credit limit you draw from as needed and repay when cash comes in. Interest only on what you use. Available up to $500,000 for most non-bank lenders.
Best for: Ongoing, recurring cash flow gaps - wages, stock, bills, materials.
→ Learn more about business overdrafts
Functions identically to a business overdraft in most cases. The terms are often used interchangeably in Australia. Standalone rather than linked to a transaction account in most non-bank implementations.
Best for: Same situations as a business overdraft.
Advance on outstanding invoices - up to 80–90% of invoice value within 24–48 hours. Repaid when the client pays the invoice.
Best for: B2B businesses with large invoices and long payment terms (30–90 days).
→ Invoice finance vs business overdraft compared
Funding for importing or exporting goods. The lender pays the supplier directly; you repay when the goods are sold.
Best for: Importers and exporters with large stock purchase cycles.
Similar to trade finance but focused on domestic supply chains. Allows businesses to extend payment terms with suppliers while suppliers receive payment quickly.
Best for: Manufacturers and wholesalers with significant supplier relationships.
| Your situation | Best product |
|---|---|
| Need a general cash flow buffer | Business overdraft |
| Waiting on large B2B invoices | Invoice finance |
| Importing goods from overseas | Trade finance |
| Seasonal revenue gaps | Business overdraft |
| Paying wages before invoices clear | Business overdraft or invoice finance |
| One-off large purchase | Business term loan |
| Equipment or vehicle purchase | Asset finance |
For business overdrafts and lines of credit - the most common working capital tools - standard eligibility is:
For business overdrafts, most lenders will approve up to 1–1.5x your average monthly revenue. Use our borrowing calculator for an instant personalised estimate.
Business overdraft costs include:
→ Full breakdown of business overdraft rates and fees
OverdraftMe specialises in working capital finance for Australian SMEs. Free broker service - we compare 50+ lenders to find your best option.
Get a free quote →Working capital finance is any type of funding used to cover day-to-day business operations - wages, stock, materials, bills - rather than long-term investments. Business overdrafts, lines of credit and invoice finance are the most common forms.
Working capital finance is short-term and revolving - you draw and repay as needed. A business loan is typically a lump sum for a specific purpose with fixed repayments over a set term.
For business overdrafts and lines of credit, most lenders will approve up to 1–1.5x your average monthly revenue. Use our borrowing calculator for an instant estimate.
A business overdraft is one form of working capital finance. Other forms include invoice finance, trade finance and lines of credit. An overdraft is the most flexible and commonly used working capital tool for Australian SMEs.
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