Guide To Debtor Finance

 

What is Trade Debtor Finance, Full Service Factoring, or Invoice Discounting?

Trade Debtor finance, Invoice-Discounting, or Full Service Factoring is where a business sells all or part of their debtors’ ledger (Unpaid Invoices) to a financier to raise working capital (Cash) for expenses, wages or fuel.

How does debtor-finance / factoring work?

As a business delivers its goods/services to its customers, the invoices (trade debts) raised can be sold to a factoring financier. 

The Factoring Financier would advance up to 80% of the un paid invoices value within 24-48 hours. The remaining 20% is advanced after the invoice is paid less a small fee of about 1-3% to the factoring financier.

The business simply forwards copies of the invoices to the Factoring financier. Once verification of invoices is complete funds are advanced.

The business can retain control over accounting functions and collections or they can opt to for the Factoring financier to control this function. In our experience, its wise for your firm to retain these controls.

What are the benefits of debtor-finance / factoring to a small business?

Trade Debtor Finance offers the business flexibility, as the following benefits illustrate:

Funds are readily available: credit sales are converted into cash normally within 48 hours.

With cash in the bank, the client can negotiate better trading terms with suppliers, including early settlement
discounts and the ability to buy in bulk.

Eliminate the need to offer settlement discounts to customers. Invoice-Discounting fees are usually
cheaper than settlement discounts. With Invoice-Finance, the client knows with certainty when they
will receive the cash.

What are the costs?

Different Factoring lenders charge different fees based upon setup structure, size and risk.The average cost of debtor-finance is 3% per month, however this will vary depending on your debtors payment terms.
The longer it takes for them to pay the higher the cost.

Why Choose the Trade Debtor Finance Consultants?

Cost: In most cases we have no direct upfront fee for our consultation.
Confidential: TDFC will not sell your information to a third party.
Choice: TDFC has access to over 22 trustworthy debtor-finance lenders.
Experienced: TDFC are experienced in debtor-finance and know what lenders to recommend for your business needs
Trust: TDFC will give you no nonsense answers and will explain all costs
Successful: TDFC can give you recent successful client referrals.