Debtor Finance: A Reliable Income Source for Growing Businesses

Many small businesses we speak to are concerned about the unstable state of the economy and the late debtor payment issues that have been recently making headlines. There has never been a more nerve-wracking, yet more exciting, time to grow your business. However, cash flow seems to be one of the hindrances to this growth.

An Introduction to Debtor Finance

Debtor finance is nothing new. It has been around for decades. In more recent years, small businesses have been focused on traditional methods of financing such as bank loans and credit card advances to grow their business or inspire expansion. With the increase in technology and information sharing, small businesses are just beginning to learn about alternative options which might have never crossed their path previously.

Debtor finance can often be confusing because it comes under a number of umbrella terms such as invoice financing, invoice factoring or invoice discounting. It uses your client invoices or accounts receivable as your collateral to advance cash funds.

Debtor Finance: Cash flow can be problematic for many reasons; late payers and rigid banking processes can often make the situation worse. Debtor finance allows a financier to advance you money against the value of your accounts receivable on a regular basis to aid your cash flow issues.

Single Invoice Finance/Selective Factoring: As large businesses are taking over three months to pay invoices, it can tie up a considerable amount of cash. Invoice financing gives companies the freedom to access the money before the client pays. Known as single invoice finance or selective factoring, you can receive an early payment of up to 90% of the full invoice amount within 24 hours. This type of debtor finance can be done on an as needed basis.

Is Debtor Finance Applicable to My Business?

Most small business owners incorrectly assume that business finance is not for them. They believe that they should have a million-dollar turnover or have thousands of employees, but this is just not the case. Debtor financing can often be company’s secret asset and aid them in the growth they are seeking.

Always Read the Fine Print

Every business who offers debtor financing as an option should be thoroughly researched, just as you would any bank or business that you are looking to partner with. Always read the fine print to ensure that you are getting the best deal for your business. Shop around and find the best terms for your situation.

Without cash, small to medium-sized businesses often find it difficult to grow and survive in a competitive business world. So you can imagine how helpful it is to receive the necessary cash within a 24-hour period. It is of course up to you what you to use the money for – there are plenty of options. Think inventory, new equipment, marketing or just to improve your cash flow situation.

If you are curious about the services we provide, please let us know. We are happy to offer information on a no obligation basis and answer any queries you have on this subject.