- Immediate cash flow for everyday needs, such as suppliers, payroll & tax commitment.
- Fund business growth.
- Free up real estate security
- Repay or reduce your overdraft.
- Improve profitability through negotiated supplier discounts on early payment.
- Convenient and flexible access to cash as required (e.g. for seasonal fluctuations).
- Fund up to 80% of your debtor invoice value within 24 hours of processing.
- Flexible line of credit which grows as sales grow (not restricted by real estate value).
- The product is tailored to suit your circumstances.
- 24-hour online access to your account, so you can view and submit funding requests at your own convenience.
- Confidential or Disclosed agreement to suit your needs.
Debtor Finance also provides assistance with debtor administration, including specialist advice, collection services and credit information on debtors.
How Does Debtor Finance Work?
As a business delivers goods and services to its customers, the invoices (trade debts) raised are forwarded to the financier. The financier then verifies the invoices and advances up to 90 per cent of the unpaid invoice value within 24 hours. The business can then access the available funds as required.
The remaining percentage of the invoice is paid to the business once the customer invoice is paid in full, less a small fee.
The business can retain control of the accounting and collections functions, or they can opt for the financier to control this function as part of a full service solution. Most Debtor Finance financiers offer online access to reporting, allowing the business to track payment receipts.
Who Is Eligible For Debtor Finance?
Debtor Finance is designed for businesses providing goods and services to other businesses on credit terms.
To be eligible for Debtor Finance, invoices must be business-to-business sales on credit terms. Invoices to private (non-business) customers, or invoices on non-credit (for example, COD) terms are not eligible for Debtor Finance. All eligible invoices must be for goods and services that have been delivered in full.
Types of Debtor Finance
There are two main types of Debtor or Cashflow Finance:
- Disclosed: the debtor or customer is notified on invoices that funds should be paid directly to the financier. This is generally known as Invoice Factoring.
- Confidential: the debtor or customer is unaware of the funding being provided. This is usually called Invoice Discounting.
Invoice Factoring is a disclosed finance facility (the business’s customers are aware of the finance facility) designed to improve a company’s cashflow by turning invoices into working capital. It provides quick access to up to 90 per cent of the value of verified invoices. The remaining balance (the retention), less charges, is made available to the business once payment is received from their customer. This facility is a recourse facility.
Invoice Factoring is commonly provided as a full service solution, with debt collection, sales ledger administration and reporting provided to businesses who do not have their own credit management resources. The financier’s professional debt collection services are able to assist in collecting debt promptly and efficiently. However, with a factoring agreement in place it is still possible for a business to continue managing their own debt collection if desired.
Invoice Discounting is a confidential finance facility (the business’s customers are unaware of the finance facility) designed to improve a company’s cashflow by providing funding against the company’s outstanding receivables. It provides quick access to up to 90 per cent of the value of the approved invoices. The remaining balance (the retention), less charges, is made available to the business once payment is received from their customer. This facility is a recourse facility.
Invoice Discounting is commonly used by established businesses that have an in-house collections or credit management department. These businesses manage their own collections and do not need the financier to collect invoices for them.
Businesses taking advantage of Invoice Discounting may not need all invoices funded, and may only use it as a type of overdraft facility for significant stock purchases or wages. Invoice Discounting allows a business to set limits on the amounts drawn down to control interest costs.
Generally, as long as the account is well-managed, only the business and the financier are aware of the Invoice Discounting facility.