Working Capital Finance : Invoice/Debtor Financing

Looking for an unsecured loan? 

If you require finance quickly but don’t have an asset to offer as security, an unsecured loan could be for you. Examples of unsecured loans include business term loans, lines of credit and overdrafts. or the below Invoice financing.

 

Debtor finance or Invoice Financing 

Debtor finance, often referred to as accounts receivable financing, is a financial solution that allows businesses to access funds tied up in unpaid invoices. Here are the main aspects:

How It Works

1. Invoice Financing: Businesses can sell their outstanding invoices to a lender (factoring) or use them as collateral for a loan (invoice discounting).
2. Immediate Cash Flow: This provides immediate cash flow, which can help cover operational costs, invest in growth, or manage unexpected expenses.

Types of Debtor Finance

1. Factoring: A company sells its invoices to a factoring company at a discount. The factoring company then collects payment directly from the customers.
2. Invoice Discounting: The business retains control over its invoices and collects payments from customers while borrowing against those invoices.

Benefits

• Improved Cash Flow: Quickly access cash without waiting for customer payments.
• Flexibility: Businesses can finance invoices as needed.
• No Additional Debt: Unlike traditional loans, it doesn’t add to the company's debt burden.

Considerations

• Cost: Fees and interest rates can vary, so it’s essential to understand the total cost.
• Customer Relationships: In factoring, the lender interacts with customers, which could affect relationships.
• Creditworthiness: Lenders will assess the creditworthiness of the business's customers, not just the business itself.

Debtor finance can be a useful tool for businesses looking to optimize cash flow and manage their finances more effectively. If you have more specific questions or need further details, feel free to ask!

Cashflow funding

 Cashflow funding is where your future cashflow (i.e. invoices that are yet to be paid) can be used as security to borrow from financiers. Especially useful for businesses that have longer payment terms (3+ months), you’re able to use future revenue to maintain good cash flow.

There will also be taxation advantages that differ depending on the type of financing you go with, but it’s always a good idea to speak with your accountant to make sure this type loan product suits your business.

For more information, call me today to discuss in more detail.