Why Debtor Finance?
Australian businesses have a real alternative to the traditional banking products particularly when facing cash flow difficulties. Rather than seeking an overdraft or line of credit for which banks generally require property security businesses can benefit from using the cash tied up in their unpaid debtor invoices, this type of funding has various names such as Debtor Finance, Invoice Finance, Invoice Discounting, Receivables Finance, Cash Flow Finance and Factoring. Most importantly they all improve cash flow by releasing cash tied up in unpaid debtor invoices.
Debtor Finance, Invoice Finance, Invoice Discounting, Receivables Finance and Cash Flow Finance are industry names employed by lenders to describe a facility which is generally provided on an ongoing basis where the businesses debtors are unaware that the facility is in place, the industry terminology for this is a confidential or non-disclosed facility.
Factoring can also be offered on an ongoing basis however, there are lenders who will provide funding against single invoices the key points of difference is:
The businesses debtor(s) are aware of the factors involvement; the industry terminology for this is a notified or disclosed facility.
The factor can also offer a sales, accounting and collection service in addition to the above.
Trade Credit Insurance is variety of insurance tailored specifically to cover a business’s unpaid invoices, this form of insurance is quite often overlooked by businesses when considering their insurance requirements, this is particularly pertinent when a business’s unpaid invoices can be a especially volatile and one bad debt can undermine a business’s cash reserves.