What is Debtor Finance, Full Service Factoring, or Invoice Discounting?
These facilities are when a business sells all or part of their debtors’ ledger (Unpaid Invoices) to a financier. Owners raise working capital (Cash) for expenses, wages or fuel.
How does debtor-finance / factoring work?
As a result of business delivering its goods/services to its customers, the invoices (trade debts) raised can be sold to a factoring financier.
Most Factoring Financiers can advance up to 80% of the unpaid invoices value. This occurs within 24-48 hours of verification. Therefore the remaining 20% is advanced after the invoice is paid from the client to the lender. Business owners are returned the final 20% less a small fee of about 1-3%.
So the business simply forwards copies of the invoices to the Factoring financier. Once verification of invoices is complete funds are advanced.
The businesses can retain control over accounting functions and collections. They may also opt for the Factoring financier to control this function. In our experience, its wise for your firm to retain the account functions.
What are the benefits of debtor-finance / factoring to a small business?
Trade Debtor Finance offers the business flexibility, as the following benefits illustrate:
Consequently funds are readily available. Credit sales are converted into cash normally within 48 hours.
With cash in the bank, the client can negotiate better trading terms with suppliers. They can also ascertain an early settlement, discounts and the ability to buy in bulk.
Eliminate the need to offer settlement discounts to customers. Invoice-Discounting fees are usually cheaper than settlement discounts. With Invoice-Finance clients knows with certainty when they will receive cash.
What are the costs?
Hence different Factoring lenders charge different fees. Lenders base this upon setup structure, size and risk. The average cost of debtor-finance is 3% per month. This will vary depending on your debtors payment terms. The longer it takes for debtors to pay, as a result, the higher the cost.
Why Choose the Trade Debtor Finance Consultants?
Cost: Our firm has no direct upfront fee for our consultation.
Confidential: TDFC will not sell your information to a third party.
Choice: Our family owned business has access to over 28 trustworthy debtor-finance lenders.
Experienced: TDFC consultants have expert experience in debtor-finance and know what lenders to recommend for your business needs
Trust: Our policies dictate that you with be given no nonsense answers and will explain all costs
Successful: TDFC can give you recent successful client referrals.
Find a facility for your business in your industry
- Transport & Storage
- Retail Trade
- Export Facilities
- Import Facilities
- New Business Owner
Read through Trade Debtor Finance Consultants PRIVACY ACT
I hope our guide using debtor finance was helpful.