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Revolving facility

A limit that grows when you invoice more.

Every other limit on this site is a number a lender sets and reviews. This one is calculated from the receivables ledger, so it rises as the business wins work and falls as debt ages.

Last reviewed 8 September 2026

Indicative interest cost

Weekly

Disclaimer

$208/week

$900 /month $10,800 a year while drawn

Facility limit $200,000

$5,000 $500,000

Average drawn balance $90,000

Nothing drawn Fully drawn

Indicative rate 12.00% p.a.

8% (secured) 30% (unsecured)

Apply directly with Prospa Why Prospa

Indicative only. Not a quote or offer of credit. Actual rates, fees, and repayments depend on the business profile and the lender's decision.

The short version

Five lines that describe it.

The limit is calculated, not set. A percentage of eligible receivables, recalculated as the ledger moves rather than fixed at approval.
It revolves like a line of credit. Drawing and repayment are at the business’s discretion and interest accrues on the balance, which is not how a receivables advance behaves.
It grows with the business. Winning work raises the ledger and raises the limit, without an application or a review.
It shrinks when debt ages. Invoices past the eligibility age drop out, so a slow month reduces the limit while the need is rising.
Indicative only. Every figure here is illustrative. Actual limits, advance rates and terms come from the lender after assessment.

The mechanism

How the limit is worked out.

The calculation begins with everything owed to the business and removes what the lender will not count. Invoices past an agreed age come out, disputed invoices and credit notes come out, related-party debt comes out, and debt owed by customers the lender will not take comes out.

What remains is capped for concentration, so no single customer can represent more of the base than the lender is comfortable with. A percentage of the surviving figure becomes the available limit, and the business draws against it as it would against any line.

The distinction from receivables funding proper is that nothing is advanced per invoice. The ledger sets the ceiling and the business borrows underneath it at its own discretion, which is a genuinely different experience from having a proportion of each invoice released as it is issued.

Start with

Gross receivables

Remove

Ineligible debt

Cap

Concentration

Advance

A percentage of the rest

Worked base

A $400,000 ledger, reduced to an available limit.

Illustrative on stated assumptions. The sequence and the direction are what matter, since every lender sets its own eligibility rules.

Step	Adjustment	Running figure
Gross receivables		$400,000
Less invoices past 90 days	-$32,000	$368,000
Less disputed and credited	-$11,000	$357,000
Less related-party debt	-$9,000	$348,000
Less concentration above the cap	-$48,000	$300,000
Eligible receivables		$300,000
Limit at 70%		$210,000 available

Illustrative borrowing base on stated assumptions. Not an offer of credit.

Reading the table

The headline percentage is applied to a smaller number than expected.

A business told it can borrow 70% against a $400,000 ledger reasonably expects $280,000. The figure that arrives is $210,000, because the percentage applies to eligible receivables rather than to the gross ledger and the eligibility rules removed a quarter of the book first.

None of that is hidden. It is set out in the agreement, and running the rules across the current aged receivables report before signing takes an hour and produces the real number. Lenders will ordinarily help with that exercise, because a facility neither party is happy with serves nobody.

The other consequence is that the limit is only as good as the ledger is clean. Old debt that is not going to be collected sits in the gross figure, contributes nothing to the base and makes every calculation less useful, which is one more reason to clear genuinely uncollectable balances off the ledger rather than carrying them, subject to the accountant’s confirmation of how that is recorded.

Against the neighbours

Where it sits between a line and receivables funding.

It borrows behaviour from both, which is the reason it is worth understanding as its own thing rather than as a version of either.

Feature	Invoice-backed line	Conventional line	Invoice finance
Limit set by	The ledger, continuously	The lender, at review	Per invoice
Drawing	At the business’s discretion	At the business’s discretion	On invoice issue
Repayment	At the business’s discretion	At the business’s discretion	When the customer pays
Grows with turnover	Yes, automatically	Only at review	Yes, automatically
Reporting burden	Moderate to high	Low	Moderate
Cost per dollar	Between the two	Lower where secured	Higher

The combination it offers is discretion over drawing with a limit that scales, which neither neighbour provides. The price is the reporting, because a limit calculated from a ledger requires the ledger to be reported.

The behaviour to plan for

The limit falls when the ledger ages, which is when the cash is tightest.

A month where customers pay slowly is a month where invoices cross the eligibility age and drop out of the base, so the available limit falls while the shortfall grows. That is inherent to sizing against a ledger rather than against a business, and it is the opposite of how a business intuitively expects a facility to behave. Watching the aged receivables report weekly against the eligibility rules turns it from a surprise into a forecast, and it is the single most useful habit for anyone holding this facility.

Who it suits

Four conditions that make it work.

A real receivables ledger

Business-to-business invoicing on credit terms. A business selling for cash has nothing to size a limit against and should be looking at a conventional line instead.

A spread of customers

Concentration caps remove the excess above a single customer’s share, so a ledger dominated by one account produces a limit well below its headline.

Growth that outruns reviews

The facility earns its cost where a fixed limit would keep needing to be raised. A stable business rarely needs a limit that moves.

A finance function that can report

An accurate aged receivables report on a schedule is what the limit is calculated from, and a business that cannot produce one reliably will find the facility unreliable.

The trade

What it gives and what it costs.

What it gives

A limit that grows with the business rather than at a review
Discretion over drawing and repayment, unlike per-invoice funding
A larger limit than an unsecured line, because the ledger stands behind it
A rate below unsecured revolving pricing for the same reason
A structure that suits a business growing faster than its balance sheet

What it costs

A limit that falls as debt ages, which is when it is most needed
Reporting obligations that a conventional line does not carry
A base that is materially smaller than the gross ledger suggests
Concentration caps that penalise winning one very large customer
A general security agreement over the business in most cases

The process

What arranging one involves.

Generalised rather than specific to any lender.

01
Ledger analysis
Current and historic aged receivables reports, because the lender is interested in how the ledger behaves over time rather than how it looks today. Ageing patterns, credit note history and concentration all come from this.
Documents commonly required
- Aged receivables reports, current and historic
- Customer list
02
Business assessment
Bank statements, financial statements and existing commitments, as with any facility. The ledger carries more of the file than it would on an unsecured line, and it does not carry all of it.
Documents commonly required
- Bank statements
- Financial statements where held
- Existing facility schedule
03
Eligibility rules and the base
The advance rate, the eligibility age, the concentration cap and how often the base is resubmitted. Running the rules across the current ledger at this point gives the real limit rather than the headline one.
Documents commonly required
- Facility agreement
- Reporting schedule
04
Security and drawdown
A general security agreement is ordinarily taken and registered, and where another lender holds one, that position has to be resolved first. Drawing then works as it would on any line.
Documents commonly required
- Security documents
- Priority deed where applicable

The honest limit

Where a conventional line is simply easier.

For a stable business with a modest limit and a clean bank record, the reporting attached to a ledger-derived limit buys very little. A conventional secured line at a similar rate does the same job with no monthly submission, and the difference in administration is worth more than the difference in flexibility.

The facility earns its place where growth is the problem. A business whose limit has been raised twice in eighteen months and is about to need raising again is spending real time on applications, and a limit that moves on its own removes that friction permanently.

It is also worth being clear that it is not a substitute for receivables funding where the need is speed. A limit that reflects invoices already issued still has to be drawn deliberately, and a business that wants cash within a day of issuing an invoice is describing a different product.

Reporting in practice

What submitting a borrowing base actually involves.

On an agreed cycle, ordinarily monthly, the business submits an aged receivables report and a calculation applying the eligibility rules to it. The lender checks the arithmetic, may verify a sample of invoices, and confirms the available limit for the period ahead.

The practical requirement is an accounting system that produces an accurate aged report on demand and a person who owns the submission. Neither is exotic and both are genuinely absent in a surprising number of businesses, where the receivables ledger is reconciled quarterly at best and the aged report is generated for the accountant rather than for management.

Where that capability exists, the reporting is a half-day a month and the facility works. Where it does not, the facility is unreliable in exactly the way that matters, because a base that cannot be submitted on time can suspend availability regardless of how healthy the ledger actually is.

The ledger as an asset

Why cleaning up the receivables book pays twice.

Aged debt that is not going to be collected sits in the gross ledger, drops out of the eligible base, and makes every calculation less useful. Clearing it improves the accuracy of the base without changing what is actually available, which is worth doing simply for the clarity.

Reducing genuine ageing pays properly. Every invoice moved from the sixty-day column into the thirty-day column stays inside eligibility longer and contributes to the base for more of its life, which raises the available limit without any change in turnover.

That is an unusual property. On most facilities, collections work improves cash flow and nothing else. Here it improves cash flow and simultaneously raises the limit, so the same effort produces two benefits and the arithmetic in favour of doing it properly is stronger than on any other facility on this site.

The cost while drawn

What a drawn balance costs to carry.

The facility charges on what is drawn rather than on the limit, so this shows the interest cost of an average drawn balance. Reporting and audit fees sit on top of it. Indicative only, and not a quote or offer of credit.

Indicative interest cost

Weekly

Disclaimer

$208/week

$900 /month $10,800 a year while drawn

Facility limit $200,000

$5,000 $500,000

Average drawn balance $90,000

Nothing drawn Fully drawn

Indicative rate 12.00% p.a.

8% (secured) 30% (unsecured)

Apply directly with Prospa Why Prospa

Indicative only. Not a quote or offer of credit. Actual rates, fees, and repayments depend on the business profile and the lender's decision.

References

Sources

Personal Property Securities Register
Backs the description of the general security registration this facility ordinarily involves.
Companies Office
The register used to confirm entities and related-party relationships during a ledger review.
External Reporting Board
Context for how receivables and their impairment are presented in financial statements.
Commerce Commission
The regulator whose guidance covers lender conduct and fee disclosure.
Financial Markets Authority, financial advice
Backs the distinction between general information of this kind and regulated financial advice.

FAQ

Invoice-backed line of credit in New Zealand, questions answered

What is an invoice-backed line of credit?

A revolving limit whose size is calculated from the receivables ledger rather than fixed at approval. It behaves like a line of credit in use, with drawing and repayment at the business’s discretion and interest on the balance.

How is the limit calculated?

Ineligible debt is removed from the gross ledger, a concentration cap is applied to any customer above an agreed share, and a percentage of what remains becomes the available limit. The calculation is repeated as the ledger moves.

Why is the limit lower than the advance rate suggests?

Because the percentage applies to eligible receivables rather than to the gross ledger. Aged, disputed, related-party and over-concentrated debt is removed first, which commonly reduces the base by a fifth or more.

How is it different from invoice finance?

Invoice finance advances a proportion of each invoice as it is issued. This sets a ceiling from the ledger and lets the business borrow underneath it when it chooses, which is a genuinely different experience day to day.

What makes the limit fall?

Invoices crossing the eligibility age, customers paying, disputes arising, or one customer growing past the concentration cap. The first of those is the one that catches businesses out, because it happens exactly when collections have slowed.

Is it disclosed to customers?

Ordinarily not. The business invoices and collects in its own name, and the lender is using the ledger to size a limit rather than collecting against it.

How much reporting is required?

More than a conventional line and less than a full receivables facility. An aged receivables report on an agreed schedule is the core of it, with periodic verification, and a business that cannot produce one reliably should look at a conventional limit instead.

Does it suit a business with one large customer?

Less well. Concentration caps remove the excess above an agreed share, so a ledger dominated by one account produces a limit well below its headline. Establishing that cap early avoids planning around money that will not be available.

What happens if the drawn balance exceeds the base?

The facility is over-advanced and the agreement sets out what follows, ordinarily repayment of the excess. Watching the base against the drawn balance weekly is what prevents that arriving unannounced.

Is security required?

Ordinarily a general security agreement over the business, registered on the Personal Property Securities Register. Where another lender already holds one, that position has to be resolved before the facility can start.

Who should not use this facility?

A business selling for cash, which has no ledger to size against; a stable business with a modest limit, for which the reporting buys little; and a business wanting cash the day an invoice is issued, which is describing invoice finance instead.

Is this page financial advice?

No. It describes how a facility works in general terms. This site is not a lender, a broker or a registered financial adviser, and whether this suits a particular business depends on facts a website cannot see.