# Invoice finance — what it means and how it helps tradie cashflow

> Invoice finance advances most of an unpaid invoice straight away so NZ tradies get cash now instead of waiting 30 to 60 days for slow-paying customers.

Source: https://tradiefinance.co.nz/glossary/invoice-finance
Published: 2026-05-15T08:00:00.000Z
Category: cashflow
Tags: glossary, cashflow
Image: https://tradiefinance.co.nz/images/resources/generated/tradie/glossary/invoice-finance-primary.jpg
Image alt: Invoices, materials and a tablet representing Invoice finance — what it means and how it helps tradie cashflow


---

## What it is

**Invoice finance** (sometimes called factoring or debtor finance) lets you turn an unpaid invoice into cash today instead of waiting weeks for the customer to pay. You've done the work and sent the bill — now it's sitting on someone else's payment run.

It works on money you're already owed, so it isn't a loan against your house or your ute — it's an advance against your debtors. That makes it different from a [term loan](/glossary/term-loan), which funds a purchase. Here it's purely about getting paid sooner.

## How it works

You raise an invoice as normal. The finance provider advances you a big slice of it straight away — typically around 80% to 90% of the invoice value. When the customer eventually pays, you get the remaining slice back, minus the provider's fee.

The fee is the cost of early access — usually a small percentage of the invoice plus a charge for the days the money is out, so the longer the customer takes to pay, the more it costs.

One word to know: **recourse**. With recourse finance — the common kind for tradies — if your customer never pays, you wear it and you repay the advance. Non-recourse, where the provider carries the bad-debt risk, costs more and is harder to get. We always check which one's on the table before you sign, so you know exactly who's holding the risk.

### A worked example

Say you're a sparkie who finishes a $40,000 (GST-inclusive) fit-out for a main contractor on a big build. Their terms are "claim by the 20th, paid the 20th of the following month" — so realistically you're waiting 45 to 60 days. Meanwhile you've got wages, your wholesaler, and GST to IRD all due now.

| Item | Amount |
| --- | --- |
| Invoice value (GST-inclusive) | $40,000 |
| Advance at 85% | $34,000 today |
| Held back until customer pays | $6,000 |
| Illustrative fee (say ~2.5% of invoice) | ~$1,000 |
| Held-back portion paid out, less the fee | ~$5,000 |

You get $34,000 in your account within a day or two instead of waiting two months. When the contractor finally pays, the $6,000 held back comes through minus the ~$1,000 fee — so the early access costs you around $1,000 all up. Those numbers are illustrative only: your actual advance rate and fee depend on the provider, the customer's credit and how long they take to pay.

## When it beats waiting for tradies

Invoice finance earns its keep when slow payers are choking your cashflow. It's a strong fit when:

- A few big main contractors pay on long terms while your own bills don't wait.
- You're scaling fast and every job ties up cash in materials and wages before you get paid.
- A one-off large invoice would otherwise leave you short for payroll or GST.

<Callout variant="tip" title="Use it on the slow payers, not every invoice">

You don't have to factor your whole book. The smart play is to only advance the invoices that actually hurt — the big, slow main-contractor claims — and leave the quick-paying domestic jobs alone. That keeps the fees down.

</Callout>

For an ongoing buffer rather than invoice-by-invoice draws, a [business overdraft](/glossary/business-overdraft) can be cheaper. Invoice finance shines when the cash is genuinely tied up in unpaid work. Either way it's about protecting your [working capital](/glossary/working-capital) — the everyday cash that keeps the doors open. Run the fee against the cost of being short and talk it through with your accountant.

## See also

- [Working capital](/glossary/working-capital)
- [Business overdraft](/glossary/business-overdraft)
- [Invoice finance vs waiting to get paid](/blog/invoice-finance-vs-waiting-to-get-paid)
- [The tradie cashflow finance guide](/guides/tradie-cashflow-finance-guide)

Not sure whether invoice finance or an overdraft fits your jobs better? As your broker, we'll size up your slow payers and the real cost of being short, then point you at the cheaper option — even if that's not invoice finance. [Book a call](/book-a-call) or [get in touch](/help) and we'll talk it through, no pressure.