# Invoice finance vs waiting 60 days to get paid
> Slow payers are killing your cashflow. Here is how invoice finance works, what it actually costs, and when the maths beats sitting on a maxed-out overdraft.
Source: https://tradiefinance.co.nz/blog/invoice-finance-vs-waiting-to-get-paid
Published: 2026-05-19T08:00:00.000Z
Category: cashflow
Tags: cashflow, invoice-finance, working-capital
Image: https://tradiefinance.co.nz/images/resources/generated/tradie/article/invoice-finance-vs-waiting-to-get-paid-primary.jpg
Image alt: Invoices, materials and a tablet representing Invoice finance vs waiting 60 days to get paid
TL;DR: Invoice finance advances most of an approved invoice now instead of waiting 60 days to get paid. On a $40k invoice it typically costs a few hundred dollars in fees. That is cheap if the cash lets you start the next job, pay your team, or grab a supplier discount — and expensive if you are just funding a slow business. Talk it through before you commit.
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You finished the job three weeks ago. The work was good, the client is happy, the invoice is sitting in their inbox. And you are still waiting on the money.
Meanwhile your team needs paying Thursday, the next job needs materials up front, and the overdraft is breathing down your neck. This is the part of being a tradie nobody warns you about: you can be busy, profitable, and broke at the same time. We see it every week — that gap between doing the work and getting paid for it is where a lot of good trade businesses come unstuck.
So let us talk plainly about your two options: wait it out, or use invoice finance.
## The real cost of a slow payer
Everyone fixates on the rate on a loan. Almost nobody puts a dollar figure on what a slow payer costs them — and in our experience that cost is usually bigger than any finance fee.
When a $40,000 invoice sits unpaid for 60 days, here is what it is quietly costing you:
- **Jobs you cannot start.** If you need $8,000 of materials to begin the next job and the cash is locked up in an unpaid invoice, that job slips. That is real revenue pushed back a month — or lost to the next crew who *can* start.
- **Overdraft interest.** If you are drawing on a [business overdraft](/glossary/business-overdraft) to bridge the gap, you are paying interest the whole time. Overdrafts are handy but they are not cheap, and once you are maxed out, that is it.
- **Supplier discounts you miss.** Plenty of merchants give you a few percent off for paying early. No cash, no discount.
- **Your own stress and time.** Chasing money is unpaid work. Every hour on the phone about an overdue invoice is an hour you are not on the tools or quoting the next job.
The point is this: waiting is not free. It just feels free because the cost does not show up as a line item. It shows up as a job you turned down, a discount you missed, and a Sunday night you spent worrying about payroll.
Profit is what is left after the year. Cashflow is whether you can pay people this week. A business can have plenty of the first and none of the second — and it is the second that puts tradies out of business. Understanding your [working capital](/glossary/working-capital) is the difference.
## How invoice finance actually works
[Invoice finance](/glossary/invoice-finance) (sometimes called debtor finance or invoice factoring) is simple once you strip the jargon away.
You have raised a genuine invoice to a creditworthy customer. Instead of waiting the full 30, 60 or 90 days for them to pay, a finance provider advances you most of that money now — typically around 80% to 90% of the invoice value within a day or two. When your customer finally pays, you get the rest, minus the fee.
That is it. You are not borrowing against your house or your ute. You are borrowing against money you have already earned and are owed. The invoice itself is the security.
There are two broad flavours:
- **Disclosed (factoring):** the customer knows and pays the finance provider directly. Often the provider handles the chasing too.
- **Confidential (discounting):** the customer keeps paying you as normal and never knows a financier is involved. You stay in control of the relationship.
Which one fits depends on your business and your customers. We work across a panel of lenders, so we can tell you which providers offer which structure, and which will take your kind of invoices.
## What it costs
Here is where you want to be a switched-on operator. Invoice finance is not free, and it is not a fixed rate, so do not let anyone quote you one as gospel. Costs typically come in two parts:
- **A service or admin fee** — often a small percentage of the invoice value, charged when you draw the advance.
- **A discount or interest charge** — applied to the advanced amount for the time it is outstanding, a bit like interest on a short-term loan.
The longer the invoice takes to pay, the more it costs. A customer who pays in 20 days costs you far less than one who drags it out to 75. That is why invoice finance suits businesses with slow-but-reliable payers, not businesses whose customers might never pay at all — the finance does not remove the risk that the debt goes bad.
Always ask for the **total cost in dollars** for a realistic payment timeline, not just a percentage. "What will this $40,000 invoice actually cost me if my client pays on day 55?" is the only question that matters.
## A worked example — $40k invoice at 60 days
Let us run real numbers. These are illustrative — your actual fees will depend on the provider, your customer, and the terms — but they show how the maths works.
You have a $40,000 (GST-inclusive) invoice to a solid commercial client on 60-day terms. You need the cash now to start the next job.
| | Wait it out | Invoice finance |
|---|---|---|
| Cash in hand today | $0 | ~$34,000 (85% advance) |
| When you get the rest | Day 60: $40,000 | Day 60: ~$5,400 (balance, less fees) |
| Indicative total fee | $0 | ~$600 (service fee + discount charge over 60 days) |
| Net received | $40,000 | ~$39,400 |
| Cost of the cash | Whatever you missed out on | ~$600 |
So the finance costs you in the region of **$600** on a $40,000 invoice paid at 60 days. Now ask the only question that counts: **what can $34,000 in your account today earn or save you?**
- If it lets you start a $25,000 job a month earlier, that $600 paid for itself many times over.
- If it lets you take a 4% early-payment discount on a $15,000 materials order, that is $600 saved right there — the finance was effectively free.
- If you would otherwise be paying overdraft interest on $34,000 for two months anyway, the gap between the two costs narrows fast.
But — and this matters — if that $34,000 just sits in the account propping up a business that is slowly losing money, you have paid $600 to delay a problem. That is the bad version.
Invoice finance is cheap when the cash does something. It is expensive when it just keeps the lights on.
## When the maths beats waiting
Invoice finance earns its keep when:
- You have **genuine work to take on** but cannot fund the start-up costs.
- Your overdraft is **maxed or close to it**, so it is not a fallback any more.
- Your customers are **slow but reliable** — big builders, councils, commercial clients on long terms.
- The cost of the finance is **smaller than the opportunity** it unlocks (a new job, a discount, keeping your best subbie on).
It is usually the wrong tool when your customers are a genuine bad-debt risk, when the underlying problem is that you are not actually profitable, or when a cheaper, simpler option would do — sometimes a tidy [term loan](/glossary/term-loan) or sorting your payment terms is the better fix. We will tell you straight when *not* to use it.
## The risks, said plainly
No hype here — you should know the downsides:
- **It is not free, and the cost rises with delay.** A very slow payer eats the benefit.
- **It can become a habit.** If you are financing every invoice every month, the underlying cashflow problem is still there. Use it to bridge gaps, not to live in them.
- **Bad debts are still yours** (in most structures). If your customer never pays, you are usually on the hook to repay the advance.
- **A personal guarantee may be required.** As with most business finance, you might be asked for a [personal guarantee](/glossary/personal-guarantee). Read it.
Because this is genuine business-purpose finance, it sits largely outside the consumer [CCCFA](/blog/does-the-cccfa-apply-to-my-business-loan) affordability regime and you will usually sign a [business-purpose declaration](/glossary/business-purpose-declaration) — which is part of why it can move quickly.
## How it fits with your other tools
Invoice finance is one lever among several, and it works best alongside the rest of your cashflow setup — a sensible overdraft for the small day-to-day gaps, invoice finance for the big lumpy ones, and tighter payment terms so you are not always reaching for either. Our [tradie cashflow finance guide](/guides/tradie-cashflow-finance-guide) walks through how to fit these together, and if your slow-payer problem is really a structural one, the [refinancing and debt consolidation guide](/guides/refinancing-and-debt-consolidation-for-tradies) is worth a read too.
A quick rule of thumb: if you can wait the 60 days without turning down work, missing payroll, or paying overdraft interest, then wait — keep the $600. If waiting costs you a job, a discount, or your sanity, that $600 is often the cheapest money you will spend all year.
As always, the GST and tax treatment of any fees is a question for your accountant or IRD — confirm it with them rather than guessing.
## Not sure if the maths stacks up for you?
The honest answer is: it depends on your customers, your margins, and what you would do with the cash. That is exactly the kind of thing worth running past people who do it every day. We work across a panel of lenders, so we can line up the right invoice finance facility for your kind of invoices — or tell you straight when a simpler fix would serve you better.
[Book a call with a real broker](/book-a-call) and we will run your actual numbers together. No pressure, no jargon — just a clear answer on whether to finance the invoice or wait it out. Prefer to read up first? Our [help centre](/help) covers the common questions.