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Debtor finance offers businesses alternative funding solutions through accounts receivable, enabling improved cash flow management and operational flexibility across various business models and industries.
Debtor finance allows businesses to unlock capital from their accounts receivable, providing immediate access to funds rather than waiting for customer payments. This financing approach helps companies maintain consistent cash flow despite payment delays of 30 to 90 days.
Invoice factoring mechanisms
Invoice factoring companies buy unpaid invoices from businesses, advancing between 70 and 90 per cent of the total value. The factoring company manages payment collection directly from customers. This suits small businesses wanting to concentrate on core operations rather than chasing payments, though customers will know about the arrangement.
Invoice discounting operations
Invoice discounting advances funds against unpaid invoices while businesses keep control of payment collection. Companies maintain direct relationships with customers, who remain unaware of the financing arrangement. Large organisations and businesses with dedicated accounts teams often choose this option to protect customer relationships.
Trade finance applications
Trade finance directly funds supplier payments using purchase orders and invoices as security. This method helps businesses maintain supply chain operations without straining working capital. Companies in sectors with complex supply chains or high upfront costs benefit from trade finance bridging payment gaps.
Selecting finance solutions
Businesses should match debtor finance options to their operational structure. Key considerations include business size, industry type, and customer relationship management needs. Finance brokers can guide businesses toward suitable options based on specific requirements and goals.
Further questions
What credit checks occur in debtor finance applications?
How does seasonal trading affect debtor finance limits?
What technology integrates with debtor finance systems?
What sectors commonly use debtor finance?
How does debtor finance affect business sale value?
This is general information only and is subject to change at any given time. Your complete financial situation will need to be assessed before acceptance of any proposal or product.
