Debtor Finance is a finance solution used to convert business invoices into cash flow.
Our debtor finance option usually means that a business can access cash based on invoices quicker and do not need to put up other business or personal assets as security.
Debtor finance helps you overcome the challenges caused by slow-paying customers or clients and can put you in a better position to pay your operating expenses.
How Debtor Finance Works
How Debtor Finance works, is that your invoices to customers become the security for the Debtor finance provider. So the Debtor Finance company essentially “buys” your invoices from you. Bills are issued to clients from the Debtor Finance company and the Debtor Financier provides you with finance based on a large percentage of the invoice immediately. The Debtor Financier then receives full payment of the invoice into their account.
With many businesses waiting up to 60 days or more to be paid after issuing an invoice – debtor finance can be a very viable solution to helping with cash flow.
Some providers can provide up to 85% against the face value of business invoices.
Debtor finance is ideal for businesses that provide tangible goods service to clients who repeatedly buy from them.
You should consider debtor finance if you find that you are facing the following challenges:
- An increase in the overall amount of accounts or invoices owing
- If you have excess stock or a build up of stock
- If you are finding you are often late paying suppliers
- If you have growing tax or super owing
- If you have loans from Directors or Shareholders into the business
You should also have strong profits and sales growth to counteract the costs associated with Debtor Finance.
Benefits of using a Debtor Finance
- As your business expands or turnover increases the limit increases in line with your growth of business invoices.
- Once a facility is approved and in place invoices are converted into Cashflow within 24-28 hours, thereby providing an efficient Cashflow management tool.
- No real estate security is generally required.
- As your business grows, so too will the amount of debtor finance available to you . This means your working capital available grows in line with your business.
If you would like to discuss debtor finance contact us.