With the RBA cash rate holding at 4.35% as at August 2026 and business overdraft rates across the market ranging from around 13.85% to 25% p.a. on top of that, the cost of sitting on an unused overdraft — or drawing on one to cover slow-paying customers — is harder to ignore than it used to be. If your business is waiting 30, 60 or even 90 days to get paid, there are two common ways to bridge the gap: draw on a business overdraft or line of credit, or unlock the cash already tied up in your unpaid invoices through invoice finance. Here’s how the two actually compare.
The Quick Answer
How a Business Overdraft Works
A business overdraft gives you a pre-approved limit to draw on as needed, with interest charged only on the balance drawn. In today’s market that interest typically runs from around 13.85% p.a. for the strongest borrowers up to 25% p.a. or more, with major banks generally sitting in the 13.7-16.25% p.a. range. On top of interest, expect an ongoing line or facility fee of roughly 1.0-1.75% p.a. of your approved limit, a one-off establishment fee of $200-$795 (or around 1% of the limit), and in many cases a requirement for property security or a director’s personal guarantee. Setting one up typically takes several weeks, since the bank is assessing your whole business rather than a single transaction.
How Invoice Finance Works
Invoice finance lets you access the cash tied up in your unpaid invoices without waiting for your customer’s payment terms to run their course. Rather than lending against your overall business, the funder advances against a specific invoice, based largely on your customer’s creditworthiness. At InvoiceInterchange, eligible businesses can typically be funded in as little as 24 hours, with pay-as-you-go pricing and no lock-in contract — you use it when you need it, and stop when you don’t.
To give you a sense of who this suits: it’s generally available to businesses with an active ABN, at least $250,000 in annual turnover, six or more months of trading history, at least one creditworthy customer (such as a listed, government or blue-chip business), and invoices of $10,000 or more.
FIND OUT MOREWhich One Fits Your Business?
- Choose an overdraft if you need funding for purposes beyond receivables, have property or security to offer, and can wait several weeks for approval.
- Choose invoice finance if your sales are growing faster than a fixed overdraft limit can keep up with, you’d rather not put up property or a personal guarantee, or you need cash within days rather than weeks.
- Choose invoice finance if a lot of your revenue sits with one or two large, creditworthy customers — a profile banks can be cautious about, but invoice financiers are built to assess.
- Many businesses use both: an overdraft for general working capital, and invoice finance specifically to unlock cash from larger invoices or a fast-growing sales pipeline.
The Bottom Line
Neither option is categorically cheaper — it comes down to how fast your customers pay, the rate and fees your bank actually offers you, and how much of an overdraft limit you’d use versus pay for and leave idle. What invoice finance reliably offers is speed and flexibility: funding that scales with your sales, without tying up property or waiting weeks for a decision.
A Smarter Way to Access the Cash You’ve Already Earned: if slow-paying customers are the real constraint on your growth, Invoice Interchange can fund eligible invoices in as little as 24 hours, with no lock-in contract and pricing you can compare directly against your bank’s rate card.
FAQs
Is invoice finance more expensive than a business overdraft?
It depends on your numbers — how quickly your customers pay and your bank’s actual rate and fees. Compare a real quote against your own invoices rather than assuming either option is cheaper by default.
Can I use invoice finance alongside my existing business overdraft?
Often, yes — many businesses use an overdraft for general working capital and invoice finance to unlock cash from receivables specifically. Check your overdraft’s terms for any general security clause over receivables first.
How fast can I get funded through invoice finance?
Once you’re set up, funding against an eligible invoice can land in as little as 24 hours — compared with the several weeks typically needed to establish a new bank overdraft.
