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Debtor Finance - The Best Option?

Debtor Finance - The Best Option?

Maintaining positive cash flow can be a perennial challenge for SMEs. Customers taking longer to pay and access to funding via traditional bank overdrafts, constrained by weakening property values, can restrict the availability of working capital.

Here are five situations where debtor finance could be the most appropriate funding solution for SMEs.

High growth

Debtor finance is an ideal solution for a business experiencing or anticipating strong growth. Debtor finance facilities grow in tandem with turnover, with the availability of working capital being tied to business performance rather than real estate values.

A typical facility will advance 80 percent of the value of receivables, so working capital of $400,000 would be available against a ledger of $500,000, $800,000 against a $1M ledger, and so on. SMEs taking advantage of debtor finance facilities do not have to live with the opportunity costs associated with turning away orders because of cashflow pressures.

Accessing the appropriate funding to support fast growth from traditional lending sources can be a challenge. Debtor finance is one of the few forms of finance that is flexible enough to keep pace with working capital requirements in a high growth scenario.

MBO/Mergers and acquisitions

One of the biggest challenges associated with buying a business as part of a management team or via a merger or acquisition is raising the capital to meet the purchase price. It is also essential to ensure the ongoing availability of working capital to meet future obligations as and when they fall due. Often the receivables ledger of the target business can be used in a debtor finance facility to generate the funds required to overcome these obstacles, as well as providing a source of working capital once the purchase is completed.

Start-up ventures

Typical small business start-ups do not have many funding options beyond re-mortgaging or seeking investment from family and friends, with the more traditional forms of finance relying heavily on past performance rather than future prospects.

Debtor financiers are more interested in potential than history and the facilities available provide access to working capital that would otherwise be tied up in receivables for 30 to 60 days or more, enabling new businesses to maintain a positive cashflow.


Businesses can hit tough times at very short notice with cash flow being adversely impacted. Events such as a bad debt, loss of a major customer, productivity delay or machinery failure are all significant incidents that might limit available cash.

Often the underlying business is strong and just needs some time and an injection of working capital to stabilise itself. Debtor finance can deliver this outcome within a very short timeframe.


In a situation where there are business borrowings secured by a property that either has to be sold or transferred due to a marital break-up, debtor finance is an ideal option. The facility, which does not require real estate security can often replace the borrowings previously secured by the property in question.

Let us touch base and show how we can help.

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Cash Injections for Growing Pains
Staying on top of Cashflow Issues


sp awards2019

         Industry Cash flow  Lender
      Award Winners 5 years in a row


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