The Loan Process
Debtor financing allows businesses to unlock cash tied up in unpaid invoices. Rather than waiting for clients to pay, businesses can sell their unpaid invoices to a financier at a discount, receiving immediate cash to maintain healthy cash flow.
Submit Application
You start by applying for debtor financing by providing information about your business, financials, and invoices you wish to finance. Required documents may include your business’s financial history and invoice details.
Approval and Agreement
If approved, you will enter into an agreement with the financier, detailing the financing terms, fees, advance rates, and repayment structure. The advance rate is typically around 70-90% of the invoice value.
Final Payment
Depending on the agreement, either you or the financier will collect payment from your customer when the invoice is due. After the invoice is paid, the financier will send you the remaining balance, minus their fees for the service.
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Why you should use Debtor Financing
Improve Cash Flow
Debtor financing allows you to access cash tied up in unpaid invoices, which can improve your liquidity. This ensures you have working capital available to cover expenses like payroll, rent, or inventory, without waiting for customers to pay.
Support Business Growth
With immediate access to cash, you can invest in new business opportunities, expand operations, or take on larger projects. Debtor financing helps maintain a steady cash flow during periods of growth, allowing you to scale without cash constraints.
Avoid Taking on Debt
Unlike traditional loans, debtor financing doesn’t add to your liabilities. Instead, you’re selling your invoices in exchange for cash. This means you avoid the burden of monthly loan repayments, making it a debt-free way to boost cash flow.
Maintain Strong Supplier Relationships
Consistent cash flow from debtor financing helps ensure you can pay suppliers on time, strengthening your relationships and potentially leading to better terms or discounts.
Bridge Seasonal or Cyclical Gaps
If your business experiences seasonal fluctuations in revenue, debtor financing helps you manage cash flow during slow periods. It gives you the liquidity you need to operate smoothly until revenue picks up again.
Quick Access to Capital
Debtor financing is typically faster and easier to obtain than traditional bank loans. Once approved, you can often receive cash within 24 to 48 hours of submitting invoices, giving you quick access to funds when you need them most.
Frequently Asked Questions
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