Factoring & Debtor Finance explained.

Factoring & Debtor Finance explained.
Factoring & Debtor Finance explained.

Factoring:

Factoring is the oldest form of lending in the world. Clients conduct work or offer a service and with this Factoring finance facility, get paid straight away instead of waiting 30 days or more. Today in the modern world more clients are on line and have email systems running making invoicing nearly paperless. As a result funding is faster and more transparent.

Factoring by explanation means you provide completed invoices into a financier and get paid a percentage of that invoice in 48 hours not 48 days. Also not to be confused with Invoice Discounting.

This is how Debtor Finance works. You submit invoices and the lender verifies the work is complete, delivered etc. Once this has occurred you will be advanced up to 80% of the outstanding invoices into your bank account. Due to increases in your Cashflow, it will gives your company the ability to purchase stock or pay bills ahead of schedule. It may also possibly create discounts and offsetting the finance cost.

Once the invoices are being paid for, your debtor will pay the full amount into the lenders account. The lender receipts the invoice, taking out amount borrowed plus a fee and gives you back your final 20%.

Example:

$1000.00 (Factored) you get $800.00 in 48 hours of verification. Debtor pays $1000.00 to lender and they take out $800.00. You get final $200.00 less lender fee.

Factoring fees.

Most lenders vary slightly in fee setups. However Factoring normally involves a credit department, collection department, and some form of account management.

Due to the level of service offered, business will have to expect a service fee. Upfront fees are charged between 2-4%. This is sometimes called administration, service, or management fee. In addition, the secondary charge is interest. This taken out of the remainder of invoices less the lenders fees.

The amount you draw or borrow times by the number of days outstanding. Depending on the lender and its borrow costs from a bank, determines your interest rate charged.

How does Trade Debtor Finance Consultants help.

Trade Debtor Finance Consultants Pty Ltd (TDFC) consultants are fully aware of lenders rates and fee structures.

Most noteworthy, is that if we don’t know the answers, we find out. Therefore for a full explanation of Factoring give a TDFC consultant a call. In conclusion TDFC stand by our service provided.

Contact Factoring Consultants today www.tradedebtorfinance.com.au  sales@tdfc.com.au

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