Debtor finance solutions have been gaining popularity in Australia as a way to finance growing companies that need cash flow. This article presents the most important advantages of this product to help you determine if this financing programme is right for your company. If you are not familiar with debtor finance, read “What is Debtor Finance?” first.
Debtor finance helps companies that have cash flow problems
The first and most important advantage of using debtor finance is that it can help a company that has cash flow problems due to slow-paying invoices. The improvements are often significant and can be noticed soon after financing the first batch of invoices. These improvements give company managers greater control over their cash flow, enabling them to better manage payments and new investments.
Extend terms with confidence
Extending credit terms to clients can be a problem for companies that don’t have sufficient cash at hand and can’t afford to wait. Debtor finance allows you to extend net-30 day payment terms to clients without having to worry about slow payments. Your company can finance the invoices and get funds immediately. When used correctly, this programme allows you to pursue new sales opportunities and grow the business
Pay important expenses
One of the most important advantages of using a debtor finance programme is that your company will have enough liquidity to meet critical expenses such as wages, taxes and supplier payments. This liquidity is critical for maintaining smooth operations and fostering growth.
Debtor finance is easier to get than other solutions
Qualifying for this programme is easier than qualifying for other solutions such as bank loans and secured overdrafts. To qualify, you must:
- Work with creditworthy commercial clients
- Sell on net-30 to net-60 day terms
- Have invoices that are free of security agreements
- Have a profitable business or a turnaround plan in place
Debtor finance is flexible and grows with your business
The financing line is tied to your accounts receivable and adapts accordingly. The line can increase, almost automatically, as your sales to qualified customer grow. This flexibility makes debtor finance an ideal alternative for companies that are growing and have immediate funding needs.
Does not require real estate security
The financing line is secured by the assets of the business. Most lines do not need real estate security from the business owners.
It can be used in turnaround situations
The line does not follow conventional lending underwriting criteria and can be offered to companies that have cash flow problems and are in turnaround situations. In these cases, the client must have a viable turnaround plan and management plan in place.
It can be deployed quickly
Most debtor finance solutions, such as factoring and invoice discounting, can be deployed fairly quickly. This rapid deployment can help companies that have an immediate need due to cash flow problems or new opportunities. Depending on the complexity of the opportunity, deployment can be done in around 10 business days.
Need a debtor finance quote?
We are a leading provider of debtor finance in Australia and can provide your company with competitive terms. For an instant quote, fill out this enquiry form. A representative will contact you shortly.