Cash flow funding while a big customer pays late

You did the work. You sent the invoice. The customer is large, solvent and will pay, eventually. Meanwhile your staff expect wages on Thursday, the BAS is due on the 28th, and your own suppliers are asking where their money is.

This is the most common cash flow problem in Australian business, and the hardest one for banks to help with quickly. A short loan secured on property you own can carry the business until the customer pays, without anyone telling the customer.

Why do customers pay late, and why does it hurt so much?

Big customers stretch terms for their own cash flow. Government agencies and head contractors work through approval chains. A missing purchase order number sends an invoice to the bottom of a pile. Whatever the reason, a small business carrying one large debtor feels it first and worst.

Three things make the gap worse than it looks:

• GST on invoices you haven’t been paid for. The ATO says that on the non-cash (accruals) method you report GST in the period you issue the tax invoice or receive payment, whichever happens first. So a big unpaid invoice can mean GST to the ATO before a cent arrives.
• Wages and super don’t wait. Payroll and superannuation run on fixed dates regardless of receipts. See covering Payday Super and payroll.
• Suppliers want their terms honoured. Paying them late to cover your debtor’s lateness pushes the problem down the chain. See supplier payments.

The ATO says businesses with aggregated turnover under $10 million can choose to account for GST on a cash basis, reporting sales GST when payment is received. If one large late payer is a regular feature, that choice is worth discussing with your accountant.

Should you use factoring or a property-secured bridge?

Feature	Invoice factoring or discounting	Property-secured bridge
Security	Your receivables	Your real estate
Does the customer know?	Usually, under factoring the factor collects	No
Setup time	Typically a week or two for a facility	Same day to 48 hours possible
Ongoing cost	Fees on every invoice funded	One loan, one term
Suits	Recurring debtor delays across many customers	One large debt or a short run of late payments
Concentration limits	Often restricted if one customer is most of the ledger	Not relevant: the property is the security
Ends	When you stop using the facility	When the customer pays, or another exit occurs

Business.gov.au describes factoring as a quick source of cash where a company buys your outstanding invoices at a discount and chases the debtors, adding that it can be expensive compared with traditional finance. For a business whose whole model involves 60-day customers, a facility may still be the right ongoing answer. For one big customer running late this quarter, a property bridge is simpler and keeps the relationship private.

How a bridge against a late payment works

1. Pin down the debt. Invoice numbers, amounts, due dates, and any written promise of payment.
2. Work out the gap. What the business must pay before the customer pays, plus a buffer.
3. Enquire. Property details, the amount owing on it, the gap and the expected payment date.
4. Choose security. A caveat loan for the quickest small bridge; a second mortgage where you keep your bank loan and the term may run longer; a first mortgage over debt-free property.
5. Sign and settle. Funds land in your business account.
6. Repay when the customer pays. In full, or in parts as payments arrive.

Waiting on a payment and short this week? Lodge a 60-second cash flow enquiry and we’ll tell you quickly if the property supports it.

Is the debt a good exit?

When the late payment is the repayment source, a lender asks the same questions you should:

• Who owes it? A government agency, a listed company or a long-standing customer with a clean history is a stronger exit than a struggling builder.
• Is it disputed? Separate the undisputed amount from anything in dispute, and rely only on the first.
• What evidence is there? Signed contracts, approved progress claims, purchase orders, emails confirming the payment run.
• How do they usually pay? Large businesses report their small-business payment times twice a year under the Payment Times Reporting Scheme. The public register lets you search and compare reports.
• What if it slips? Every bridge needs a second way out: a refinance, an asset sale, or other receipts.

The small business ombudsman (ASBFEO) suggests checking, ten days before an invoice is due, that it has been processed and scheduled for payment. It’s a simple habit that catches many delays before they happen.

How much should you borrow against a late invoice?

The instinct is to borrow the full invoice. Usually that’s too much. The loan only needs to cover what has to be paid before the customer pays, plus a sensible cushion.

A simple way to size it:

1. List the hard dates between now and the expected payment: payroll runs, super, BAS or IAS, rent, and supplier accounts that would stop supply if missed.
2. Subtract what will come in anyway from other customers over the same weeks, being conservative.
3. Add a buffer of a few weeks’ costs in case the payment is later again.
4. Stop there. Anything above that is borrowing for comfort, and comfort costs interest.

Then set the term with the same caution. If the customer’s promised date is in five weeks, a three-month term protects you if the payment run slips once. If it is paid early, many loans allow early repayment, so check that term on your Letter of Offer.

A smaller, well-sized bridge is also easier to approve on less equity, which matters if your property already carries a home loan or business loan.

Who it suits

• Subcontractors and trades waiting on progress claims or retention. In NSW, retention money on projects valued over $20 million must be held in a trust account, which helps certainty. See construction and trades.
• Professional firms with a large client on extended terms. See professional services.
• Suppliers to government or big retail whose payment cycles run 60 to 90 days.
• Businesses delivering a large contract where costs are front-loaded. Read funding a big contract with property security.

When this isn’t the right move

• The customer may not pay at all. If insolvency is a real possibility, a bridge simply adds secured debt to an unsecured loss. Get legal advice on recovery first.
• Late payment is permanent. If every customer pays at 60 days, you need a working capital structure, not a series of bridges. Compare secured working capital loans or an invoice facility.
• The gap is tiny. A few thousand dollars for a week is cheaper to handle with an overdraft or by talking to the creditor.
• There’s no property equity. This lending needs real estate security.

What it costs (without the guesswork)

Without the specifics, any price would be a guess, so we don’t publish one. The pricing on a debtor bridge follows the property, the borrowing measured against it, the length of the wait and how reliable the paying customer is. We aim to make it as keen as those facts permit. You’ll see:

• Interest, which can be prepaid or capitalised so nothing is paid until the customer settles. See the prepaid interest glossary entry.
• An assessment fee, varying by loan, on your Letter of Offer.
• Legal and registration costs for the caveat or mortgage and its later removal.

There’s no formal valuation required, which keeps the timeline short. Second-ranking security costs more than a first mortgage, reflecting where the lender sits on the title.

Documents you’ll need

• Photo ID for the borrowers and any guarantor.
• The unpaid invoices, contract or approved progress claim, and an aged receivables report.
• Correspondence showing when the customer expects to pay.
• The security property’s address and the latest statement for any loan on it.
• Company or trust details if the borrower is an entity.

How fast

Smaller property-secured amounts from $20k to $250k are possible same day, and up to $5m is possible within 24 to 48 hours once paperwork is complete. Payroll and BAS dates are fixed, so begin the enquiry when the payment is first late, not on the morning wages are due. Same-day details are on same-day business loans.

Illustrative example: a Perth subcontractor waiting on a progress claim

Illustrative example: A Perth electrical subcontractor is owed $310,000 on an approved progress claim, now at 75 days. Payroll, superannuation and a quarterly BAS total $185,000 over the next three weeks. The director owns a unit worth about $600,000 with no mortgage. At an illustrative 60% band, the unit supports a first mortgage of about $360,000.

Bridge sizing	Amount
Payroll, super and BAS due in 3 weeks	$185,000
Buffer for one more month of materials	$35,000
Principal	$220,000
Four months of interest, capitalised	priced on the deal
Assessment fee and legals	priced on the deal
Fits the security?	yes, under the illustrative $360,000
Exit	The $310,000 progress payment, with the business’s next two claims as backup

The loan settles the same week. The head contractor pays at day 98, and the loan is repaid in full well inside the four-month term. For local notes on Western Australian title, see our Perth private lending page.

Keeping the next late payment from becoming a crisis

• Agree payment terms in writing and invoice promptly with every reference the customer’s system needs.
• Check the customer’s record on the Payment Times Reports Register before taking on a big job.
• Consider cash-basis GST if you qualify, so GST follows receipts.
• Diversify. One customer above a third of revenue is a standing cash flow risk.
• Know your options before you need them. A pre-checked property and documents on file make the next bridge faster. For the comparison between a caveat and a bridging loan, see caveat loan vs bridging loan.

See if you qualify while you wait to be paid

Your customer will pay in their own time; your bills won’t wait for them. There’s no credit check when you enquire, and we don’t pass your file around to other lenders. A specialist reviews it and comes back to you. Describe the property, any loan already on it and the debt you’re waiting on as accurately as you can, and the answer will stand up when the paperwork arrives.

See if your property can carry you to payday, or start with secured business loans explained.