What is Debtor Finance?
Debtor Finance is, quite simply, a line of credit linked to and secured by your outstanding accounts receivable.
If your business supplies products or services to other businesses on standard trade credit terms, Debtor Finance can help.
There are a number of variations in how the service is delivered, ranging from Confidential Invoice Discounting (for larger, more sophisticated businesses with a dedicated finance department) to the option of full management of accounts receivables (which allows many of our smaller clients to focus on growing their businesses rather than chasing outstanding invoices).
What are the benefits of Debtor Finance?
It is a powerful standalone business finance facility, which helps because:
- As your business grows the facility grows with it
- Unlike a traditional bank overdraft, there is generally no need for real estate security
- It is a standalone facility that can sit alongside other business borrowings (such as overdrafts, term loans, and asset finance)
- It helps you grow your business and increase purchasing power through improved cash flow
- There are no capital repayment requirements
How does Debtor Finance work?
You invoice your client directly, and upload the invoice to us at the same time. Within 24 hours we will pay 80% of the value of approved invoices, less our fees. The remaining 20% becomes available to you when the invoice is paid in full.
Imagine you are a furniture importer who wholesales to other businesses.
You buy a chair for $20 and sell it for $50, BUT you only had $20 and have to wait to get paid (possibly 45 to 60 days) before you can buy and sell another chair.
No problem, Scottish Pacific can give you up to $40 against the invoice within 24 hours (with the balance on full payment by the debtor), meaning that you can immediately go and buy two chairs for your $40 and sell them for $100...
Now we can give you $80 against the second invoice and you can buy four chairs and so on. The math speaks for itself!
This is a very simple example, but debtor finance is just that - simple.
Without Scottish Pacific...
- Buy a chair for $20
- Sell the chair for $50
- Wait for payment to buy another chair...
With Scottish Pacific...
- Buy a chair for $20
- Sell the chair for $50 but rather than wait to get paid, receive $40 the next day, meaning you can...
- Buy 2 more chairs
Will Debtor Finance suit my business?
If you answer “Yes” to these 3 questions, your business could benefit from a debtor finance facility.
- Do you sell products or services to other businesses on standard trade credit terms?
- Are your invoices issued for delivered goods or completed services (i.e. not issued on a progress claim/milestone basis)?
- Does your business have an annual turnover greater than $200,000?
For more information about how we can help your business, fill out a quick enquiry form or call us on one of the following numbers: