What is debtor finance?
If slow debtor collections are a problem, a debtor finance facility may be the best solution. Essentially what debtor financing means is selling your debtors to a financier, who gives you a portion of the value of invoices you have raised up front. In return they charge interest and fees. When the debtor pays, they give you the rest of the invoice amount.
Debtor finance can be a very flexible form of funding. As the business grows, its debtors increase and it issues more invoices. The finance facility can grow in line with the growth of the business.
When is debtor finance an option for me?
Debtor finance is ideally suited for:
Supports businesses in the start up and early growth phases. Debtor financiers are more concerned with the future than the past and do not place the same reliance on historical financial performance and information.
Fundamentally good businesses recovering from a specific issue that has had an adverse impact on their cashflow, such as a bad debt or a loss of production.
Debtor finance facilities are stand alone, being secured by the invoices raised by the business itself and can therefore be used to complement or repay traditional bank overdrafts potentially freeing up real estate property (importantly the family home) from the security mix.
Can be used to support businesses through a formal restructure process including Administration and Deed of Company Arrangement (DOCA) where necessary.