What is a Debtor Finance?
A Debtor Finance product gives you greater cash flow certainty to grow or restructure your business, enabling you to convert up to 80% of your unpaid invoices to cash, usually within 24 hours. Debtor Finance is a specialist lending facility without the need to renegotiate increased facilities, or rely on other personal or business assets as security. It is part of the smart set of business finance facilities s to give you real choices and flexibility.
When should you apply for a Debtor Finance?
Following are some business phases in which Debtor Finance could be exactly what you need to help you begin moving towards a brighter future:
• Managing a new growth phase • Meeting seasonal peaks in demand • Taking advantage of market opportunities • Improving response times and service levels to your customers (especially for major orders or projects) • Funding a new business start up • Funding transition, such as management or partner buy-out, or family succession.
How does a Debtor Finance work?
-Boosts cash flow immediately:
Debtor Finance gives you an initial payment of up to 80% of the value of your invoices, usually within 24 hours of processing. The balance, less fees, is paid to you when your customers settle their accounts. All you need to do is forward details of your sales on an ongoing basis.
With a reliable cash flow, you are in a better position to negotiate keener prices from your suppliers and reduce your reliance on an overdraft. You can also save time on administration. And, because you don’t need to offer early settlement discounts, you can get a better return on your goods or services.
Would my business qualify for a Debtor Finance?
Each business has its own particular needs, strengths and weaknesses. Applications for Debtor Finance are assessed on a case-by-case basis. As a guide: Your business should:
• Have experienced management
• Be growing, or have real potential for growth
• Be profitable, or moving towards profitability
• Demonstrate that it will benefit from Debtor Finance agreements
What benefits can a Debtor Finance provide?
• Debtor Finance is usually based on the profitability or potential of the business, not on your private or commercial assets. When there is a change in ownership or a shift in shareholder equity, the Debtor Finance facility continues, unaffected by the new owners’ assets.
• Debtor Finance avoids the need for owners to offer assets as security when an injection of working capital is required to grow the business.
• Where customers have up to 90 days to pay Debtor Finance helps you meet immediate costs such as wages and contractor fees.
• A new business with startup losses could use Debtor Finance to move more quickly into the black without further capital investment.
• A company being restructured needs to maintain its cash flow to meet recurring costs. Debtor Finance can be used to manage the restructuring process.
• Where the financial facilities of an established private company are secured by the private assets of the founders, Debtor Finance can be used to release the founders’ assets and ensure a smooth transition to the new owners. Typically, this would be for a management buyout or a generational succession in a family business