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Invoice finance vs trade finance
Not competing products. One funds paying your supplier, the other funds waiting on your customer.
Trade finance and invoice finance both fund gaps in the same business cycle. They just sit at opposite ends of it. Trade finance covers the gap between paying a supplier and getting your stock. Invoice finance covers the gap between issuing a customer invoice and being paid. Depending on your business, you might only ever need one, or you might need both.
Trade finance tops out around $5,000,000 for the right business. Invoice finance can scale far higher against the right debtor book.
You need to pay a supplier before you’re paid yourself
Funds the purchase of stock or equipment before it’s sold or put to work, domestic or international, secured by the transaction itself rather than property. Most facilities run to a maximum term of 90 to 120 days.
You’re waiting on customers who’ve already been invoiced
Releases cash tied up in unpaid customer invoices, typically 80% to 90% of the value, instead of waiting 30, 60 or 90 days to get paid. Secured by the invoice itself, not property.
What are the main types of each product?
Trade finance covers a letter of credit (a bank guarantee that payment reaches your supplier once shipping documents are verified), a pre-shipment or import loan (funds advanced to buy stock before it’s sold), and supply chain finance (a third party pays your supplier early on your behalf). Invoice finance splits into factoring (disclosed: the lender collects from your customers directly) and discounting (you keep your own ledger, and the arrangement can stay confidential). See our trade finance page and invoice finance page for the full detail on each.
| What matters | Trade finance | Invoice finance |
|---|---|---|
| Facility limit | Up to $5,000,000+ for the right business | $50,000 to $100,000,000+ for the right business |
| Security | The transaction itself, not property | The invoice itself, not property |
| Typical term | Up to 90-120 days maximum | Matches your customer’s payment terms |
| Paperwork under $250k | Often minimal, bank statements and ID | Connects to accounting software with the right lender |
| Funds the gap between | Paying a supplier and receiving stock | Issuing an invoice and being paid |
How do the two fit a real cash cycle?
This is where the comparison stops being abstract, because the answer for most wholesalers and importers is that neither product covers the cycle on its own. Count the days on a typical import-and-resell run:
This matters more in a sector that isn’t growing its way out of trouble. The ABS counts of Australian businesses show wholesale trade business numbers grew just 0.5% in 2025-26, against 3.1% across all Australian businesses. When the number of competitors is flat, a larger order usually means taking work from someone else rather than riding demand. Winning it depends on being able to fund both ends of the cycle below.
| Stage | Days | Running total |
|---|---|---|
| Pay the supplier | Day 0 | Cash out |
| Production and transit | 45 days | Day 45, goods arrive |
| Stock on hand before sale | 30 days | Day 75, sold and invoiced |
| Customer pays on 60-day terms | 60 days | Day 135, cash in |
That is 135 days between paying for the stock and being paid for it. Most trade finance facilities run to a maximum term of 90 to 120 days, so used alone the facility falls due roughly 15 days before the money arrives. That mismatch is the most common way a trade finance facility goes wrong, and it’s a timing error, not a pricing one.
Run the two together and the arithmetic resolves. Trade finance funds days 0 to 75, from paying the supplier to issuing the invoice. At day 75 the invoice exists, so invoice finance advances 80% to 90% of its value and retires the trade facility 60 days earlier than the customer would have paid, and comfortably inside the 90 to 120 day cap. Read that way, the cap isn’t a limitation of trade finance. It’s a design assumption that something else clears it.
Know what the advance rate leaves behind. On a $100,000 invoice, an 80% advance releases $80,000 now and the remaining $20,000 on settlement. At 90% it’s $90,000 and $10,000. That residual isn’t a fee. You receive it when your customer pays, less the facility charges. But it does mean the cash you can plan around is the advance, not the invoice.
Illustrative day counts, chosen to show the structure rather than to describe any particular business. Advance rates and facility terms are as published on our trade finance and invoice finance pages. Map your own cycle before choosing either.
Can you use both together?
Yes, and for a wholesale or distribution business carrying trade credit on both sides, it often makes sense to. Trade finance covers what you owe suppliers. Invoice finance covers what your customers owe you. Structured correctly, the two can fund each other: money collected from invoices funds the next round of stock. If only one side of your cycle is tight, a single matched facility is usually simpler and cheaper than running both. And if the two sit with different lenders, get each one’s sign-off before you sign the second.
Choose trade finance if
- You need to pay a supplier before your own customer pays you
- You’re buying stock or equipment, domestic or overseas
- You expect to be repaid within 90 to 120 days
Choose invoice finance if
- You invoice other businesses and wait 30-90 days to be paid
- You want cash released against invoices already issued
- You’d rather not run a stack of paperwork every time you draw
If you expect a longer repayment runway than 90-120 days
Trade finance is built for a short, transaction-specific timeframe. If your cash cycle runs longer than that, a business overdraft is usually the better-fitting tool, not a stretched trade facility. Tell us how your buying and selling lines up, and we’ll size the right structure, one facility or both.
Paying suppliers, waiting on customers, or both?
Tell us how your cash cycle runs, and we’ll tell you whether one facility or both fits your business.
Frequently asked questions
Give us the basics below and we’ll call you within the hour, or at the time you choose, then come back with the two or three offers worth your time.