Quick answer
An assignment of debts is a legal transfer of the right to collect money owed to your business, usually your unpaid customer invoices, to someone else. In business lending it's the backbone of factoring and invoice finance: the financier takes over the receivables, advances you a share of their value up front, and collects or is repaid when your customers pay. In Australia it's registered on the PPSR.
Key points
- You hand over the right to be paid on invoices, not the customer relationship itself
- The Personal Property Securities Act treats a transfer of an account as a security interest, so financiers register it on the PPSR
- Whether your customers are told depends on the facility: factoring usually notifies them, discounting usually doesn't
- An existing bank security over all your assets may need a priority deed before an invoice lender will fund
Every unpaid invoice is a small asset: a legal right to be paid a set amount by a set date. An assignment of debts moves that right from your business to another party. You still did the work and you still own the customer relationship, but the money, when it arrives, belongs to whoever holds the assignment.
Where you’ll meet it
Most owners first see the phrase in an invoice finance contract, often in a document titled “deed of assignment” or “master receivables purchase agreement”. It’s the clause that lets a factor or invoice discounter fund you against your sales ledger. Some trade finance and supply chain facilities use it too, as do a few lenders who take a specific assignment of one large contract payment, such as a progress claim on a building job.
Under general Australian law, an assignment generally becomes a legal (rather than merely equitable) assignment when it’s absolute, in writing, and the customer who owes the money receives written notice. That’s why notice matters so much: once a customer has been properly told, paying you instead of the financier doesn’t discharge their debt.
Why the PPSR comes into it
The Personal Property Securities Act 2009 treats the transfer of an “account”, which includes a trade debt, as a security interest, even when the invoices are sold outright. So the financier registers its interest on the PPSR. Registration protects it if your business later goes into administration or liquidation, and it sets priority against other secured parties.
That last point catches people out. Where a bank lent you money earlier and took a general security agreement sweeping in everything the company owns now or acquires later, that earlier registration probably already reaches your receivables. An invoice lender will usually ask the bank to sign a priority or subordination deed that carves the debtor ledger out before it advances anything. Raise this early, because waiting on a bank’s consent can stall a facility for weeks.
Disclosed or confidential
| Disclosed (typical of factoring) | Confidential (typical of discounting) | |
|---|---|---|
| Customers told? | Yes, notice of assignment sent | No, unless a default occurs |
| Who chases payment | Usually the financier | You do |
| Payment goes to | Financier’s account | A trust or controlled account |
| Usually suits | Smaller or newer businesses | Larger ledgers with sound credit control |
Our factoring vs discounting comparison goes deeper on the trade-offs. If cash is tight now, you can send us a quick enquiry while you read.
A worked example
A Melbourne packaging wholesaler has $400k in approved invoices outstanding, mostly on 60-day terms. It signs a confidential invoice discounting facility. The financier takes an assignment of the whole ledger, registers on the PPSR, and advances 80% of approved invoices: $320k available straight away. When each customer pays into the controlled account, the financier keeps what it advanced plus its charges, and the remainder flows back to the wholesaler. New invoices keep being assigned as they’re raised, so the available funding moves with sales.
Before the first drawdown, the wholesaler’s existing bank had to sign a deed confirming the invoice financier ranks first over the receivables. The bank kept its security over equipment and stock.
Run your own ledger through the invoice finance calculator to see what a similar advance might cost in dollars.
Related terms
Factoring, invoice discounting, debtor days, aged receivables and security interest.
Thinking of borrowing against your invoices?
Customers on 60-day terms can starve a perfectly profitable business, and handing over the ledger is often the fastest property-free way to unlock that money. Tell us about your debtors and terms in the form; filling it in is about a sixty-second job, and nobody runs a credit check because you asked. We don’t circulate the enquiry around a list of financiers; one person reviews your ledger figures and rings you to talk them through. Please be precise about turnover and what’s currently owed to you, since that’s what lets us point you at a workable facility on the first call.
Frequently asked questions
Is an assignment of debts the same as selling my invoices?
It can be. In factoring, the debts are commonly sold outright to the financier. In invoice discounting they're more often assigned as security for an advance. Either way the paperwork transfers the right to collect, and for PPSR purposes both are treated as security interests.
Will my customers know I've assigned their invoices?
Under a disclosed facility, yes: they receive a notice of assignment and new payment details. Under a confidential facility, they keep paying into an account that the financier controls, and they're only notified if something goes wrong, such as a default.
Can a customer contract stop me assigning the debt?
Some supply contracts include clauses that ban assignment. The Personal Property Securities Act limits how far those clauses can block a transfer of an account, though exceptions apply, so ask the financier or your lawyer to review any customer contract with that kind of wording.
What happens to the assignment when the facility ends?
Once everything owed is repaid, the financier releases its interest, removes its PPSR registration and, where customers were notified, tells them to pay you directly again. Ask for written confirmation of all three.
Do I need an assignment to get a normal business loan?
Usually not. Term loans and unsecured loans rely on guarantees or a general security agreement. A specific assignment of debts is mainly used for invoice finance, factoring and some trade finance facilities.