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Debtor Financing is a facility that allows businesses to receive financing capital related to a portion of accounts receivable. It is another method to boost the working capital/cash flow of a business.
Under debtor finance, lenders provide a limit against the accounts receivables ledger of the business. Businesses can get financed up to 90% of their receivable ledger. They don’t require to provide any additional security.
Similar to a business line of credit, the interest is only charged on the amount drawn and not the entire limit. This allows businesses to stay on top of businesses’ expenses and make growth decisions.
What makes me eligible for Debtors Financing?
| Borrowing Limits | |
|---|---|
| Loan Amount | $5k- $150M |
| Term | Ongoing |
| Can be used for |
|
| Repayments | Gets settled against payment of debtors within 60-90 days |
| Security | Secured against current assets of the business No real estate security required |
| Pre-Approval Time | 24 – 72 hours |
| Unconditional Approval and Settlement Time | 7-10 days |
| Documents required |
|
| Interest Rates | Starts from 9.99% p.a. |
| Benefits |
|
*The information provided in critical information sheet is intended as a guide only. Please contact us for more information
In past, many businesses considered debtor finance facility as a complex funding option and shied away from exploring the potential high funding possibility without the need of pledging a real estate security. However, with advancement and technology and digitalization of bookkeeping and accounting services, debtor finance facility has become one of the easiest ways to unlock cash flow of your business in advance. Once your business is approved a debtor finance limit, you need to follow the following 4 steps to get the funding which can be completed within 2-4 hours:
Upload your receivables ledger with invoices as a proof
Once the invoice is verified against the ledger and approved, the lender pays you up to 90% of the ledger
As your debtor pays the invoices, the balance of invoice will be paid to you net of charges.
Repeat the same process as you have new debtors on the ledger.
Generally, a detailed assessment is done before approving Debtor finance limit and would require the following documents.
Although Debtor Financing may look very similar to Invoice Financing on a fundamental level, there are differences you should know before choosing one. The major difference is the component that determines the limits of the funds.
Check the basic loan eligibility of your business as mentioned above
Once you complete your application form. We get in touch to discuss your business requirement and advice the documents required.
Once we get all the documents required, we login your application with the most suited lender and get the loan approval
The best feature of Debtors Financing is that it enables you to unlock the cash in advance to keep up with your working capital needs. On top of this, there are many scenarios you could find having Debtor Finance useful such as:
A Debtor Finance works similarly to a business line of credit. Here, the lender approves a debtor finance limit for your business based on your monthly activities within your accounts receivables. To withdraw funds, you need to provide/upload an accounts receivables ledger on the lender’s portal. You would be able to withdraw up to 90% of the amount of the receivables. Once the debtor pays their owing payment, your outstanding debt will be settled against the money received, and the balance would be transferred back to you after deducting the interest cost/charges for that period.
Debtor Financing is not a feasible product for every business. It depends on how you collect payments from your customer. For instance, if you have a retail coffee shop, you may not be eligible, as you would hardly raise an invoice on your customers as all your revenue would be driven through cash or POS. To be eligible for debtor finance, your business should have regular account receivables activities. Debtor finance is ideal for businesses where the credit period is generally higher.
A Debtor finance limit may have one or a combination of the following costs:
Interest cost: Interest charged on the funds drawn against the receivables for the period it remains outstanding.
Line fees: There could be a small monthly/annual fee charged by the lenders for facilitating you debtor finance limit throughout the term of the loan irrespective of your utilisation.
Receivable ledger Processing Fees: Instead of a line fee, some lenders may charge a one-off ledgers processing fee on each debtor’s finance throughout the term of the limit. Some lenders may give you an interest-free period of 60-90 days for a slightly higher processing fee.
Please feel free to reach out to us on 1300 253 041 or send us a message in case you wish to know more.
The debtor funding limit is determined based on the monthly receivables’ activity of your business. Generally, lenders are open to provide a limit of up to 3 – 4 months of the receivables raised by your business.
Generally, you are not required to provide any additional property security. The funding is advanced against the receivables raised and the lenders would have to charge over the account receivables.
Generally, a debtor finance limit is a less risky and more flexible product as compared to a normal unsecured business loan product and lenders can approve a higher limit which is not possible with an unsecured business loan or a normal business line of credit limit.
Generally, lenders can advance you up to 90% of the account receivables value depending on the risks associated with your business.
A Debtor Finance limit may not always be the right option for your business as you may have a business wherein you do not have account receivables activities, or your business requires a smaller loan amount, and a simpler option would be more suitable. There are various alternative business loan options that we can help you with. Some of the popular options are secured business loans, unsecured business loans, business line of credit and vehicle and equipment finance facilities. Please reach out to us on 1300 253 041 or send us a message. One of our lending specialists would get in touch in no time to assist you.
At Broc Finance, we endeavour to get the most adequate facility suitable to the business requirements of our clients. In most of the cases logged in through us, we try to get an indicative offer from the lender for our client’s consideration before proceeding with formal application and consent to credit check. This approach helps our clients to avoid unwanted rejections and credit checks which can significantly impact their credit scores.
We would be happy to answer if you have any other questions. Please contact us.
Contact us today and discover how our expertise can help your small business thrive.
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1300 253 041
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enquiries@brocfinance.com.au
Broc Financial Services Pvt Ltd.
ACN 648 088 304
Credit Representative number 540795 is Authorised under Australian Credit Licence Number 389328