Debtor Finance

What is debtor finance?

• Debtor finance is a line of credit secured against accounts receivable.

• Also known as invoice finance, factoring, cashflow finance and invoice discounting, it is a form of finance that provides access to working capital that would otherwise be tied up in receivables for 30 or 60 days or more.

How does debtor finance work?

• Debtor finance is a flexible cash flow facility. A business invoices their client directly, and uploads the invoice to the debtor finance provider. The provider will, typically within 24 hours, advance up to 80% of the value of approved invoices, less fees. The remaining 20% becomes available to the business when the invoice is paid in full.

What are the benefits?

• Debtor finance facilities are self-liquidating. Instead of taking on additional debt, an advance is offered on money that is already owed to the business.

• Unlike most overdraft facilities, debtor finance does not generally require real estate security.

• It is a growth enabler, enhancing cash flow to fund extra staff, additional stock or capital expenditure.

• It is a standalone facility that can sit alongside other business borrowings (such as term loans and leasing).

• As a business grows, the facility grows with it. Once the debtor finance facility is in place there is generally no need to re-negotiate increased facilities as available funding grows in proportion to sales.