​​Debtor Funding

Debtor Funding has a bad reputation but has changed dramatically in the past few years. It is an ideal facility for companies that provide goods or services and have a payment cycle of 30-60 days. 
You can get an advance on monies owed to you, which provides working capital to your business when needed, in a very cost-effective manner.                    For Companies growing fast, it allows them to access working capital in a more flexible way.  It is also a very good option for start-up businesses.
Rates vary and depends on whether you want.
  • Ongoing facility or just a spot invoicing facility
  • Disclosed or undisclosed
  • What type of debtor concentration you need
  • What type of industry you work in
Rates can be from as little as 1.5% per month for this type of funding now

Example Case Study

Problem

ABC Pty Ltd is a successful business supplying Shelving & Mobile storage bins to large corporations, who pay average terms of 45 days.  The Business is growing, however, he has just won a new contract.  He needs to buy additional stock and still keep up with wages and general expenses, before he is going to get paid.

Solution

ABC Pty Ltd was approved for a $1m debtor funding facility and combination $250k Trade/ Line of Credit.  He receives 80% of the invoice value upfront and the balance, less fees and charges, once his customer pays the invoice.  He can also opt to use the Line of Credit to purchase stock and pay over 4 months.

ABC Pty Ltd is Happy!

The profit generated by the additional business more than offsets the cost and has taken his company to the next level. 


FAQ'S

Do I have to pay fees on my whole Debtor book?

Do I have to pay fees on my whole Debtor book? 

No – the newer type of facilities now offer you the choice of which invoices you fund.  Fees are charged on the amount drawn and not the debtor book.

What if I only have one Debtor?

What if I only have one Debtor?   

Concentration limits are now quite flexible as well. 

Isn’t Debtor funding expensive?

Isn’t Debtor funding expensive?

No not any more.  Many facilities now only charge you on Debtors funded.  They are quite flexible and can be used alongside traditional trade type facilities.  Interest rates are really good and many of the large monthly fees are now gone.

My business is only new – does that matter?

My business is only new – does that matter?

Debtor Funding focuses on your Debtors.  For this reason it doesn’t always matter how long you have been trading for.  Rate is normally determined by type of Debtors you have, type of business/industry you are in and your level of turnover/facility size needed.

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