Debtor finance is another term for invoice finance. It can also be called invoice factoring, invoice discounting, or accounts receivable finance. Put simply, it allows you to improve your business cash flow by accessing a percentage of the value of your unpaid sales invoices in the form of a cash advance. The invoices themselves act as security. That is, no real estate security is required. This allows your business to get paid quickly.
How does it work?
Simply send your invoices to the debtor finance firm. The debtor finance firm will provide an agreed-on percentage cash advance of the invoices to your business, usually 80%, generally within 24 hours of confirmation of the invoices being received. Your customers pay the money owed on the invoices directly to the debtor finance firm. Once your customer’s invoice payments are received, the debtor invoice firm provides your business with the remaining invoice balance, known as a rebate, less any fees for the finance service offered.
What are the benefits?
It means you do not need to wait for the payment of your invoices. You can unlock most of the money quickly and easily, providing you with positive cash flow for immediate business expenses and/or business investment and growth. Another benefit is that you do not need to go through a bank for a line of credit which can take weeks for the approval of money you need for your business now.
What is the cost?
The cost varies and is dependent on the size of your invoices, the quantity of invoices, the duration of your invoices, and the quality of your customers.
Debtor finance is a great solution for small to mid-sized businesses wanting access to the working capital they need to cover their expenses. Contact us today for an obligation-free discussion to see how we can help your business prosper.