Invoice Debtor Funding is a specialist commercial credit facility which allows businesses to more quickly receive payment for invoices issued to customers. At some stage of their operational life most businesses will experience cashflow issues, not having sufficient funds to meet bills, wages and other commitments.
If you regularly experience cashflow issues, perhaps it’s time to take a different approach to dealing with the situation. As this new financial year gets underway, why not consider making a change and considering other options to the way you’ve been handling the problem to date.
While many will look at the symptoms – not having funds to pay their bills, not as many may delve deeper and look for a solution to the problem itself - at the source. A Business Overdraft or line of credit is a very popular choice for businesses experiencing cashflow issues. Overdrafts can be extremely effective and can be relatively easily obtained through the business’ bank. But the interest rate on Overdrafts is high and the business can easily lapse into a false sense of security with those funds available as back up. Paying interest only on the funds used is helpful and can be an affordable way to deal with intermittent, short-term problems.
But it is only targeting the symptom. What exactly is causing the problem? That could be the question that many operators need to address and start targeting the source of the problem. For many, the source of the problem can be slow paying customers or long interval progress payments.
In the current economic climate with both individuals and businesses feeling the effects of high inflation and rising costs-of-living and operating expenses, putting off payments. For the businesses waiting for those payments to meet their own commitments, this can spell problems.
For operators in the construction and building sector, waiting for progress payments while having to pay for the materials, wages and supplies for the job is standard procedure, but can result in issues.
Financing through specialist lenders is available to directly address the issue of timely receipt of invoice payments with Debtor Invoice Funding.
What is Debtor Invoice Funding?
Debtor Invoice Funding is a type of loan or credit facility available to businesses that issue invoices to customers. The lender funds the payments and remits a set agreed percentage of invoices to the business at the time the invoice is issued. The remaining percentage is remitted when paid by the customer. Businesses receive funds to keep their cashflow going, while paying interest on the funds provided by the lender prior to the customer payment.
How does Debtor Invoice Funding Work?
This is a specialist credit facility and may sound complex, but when set-up, it is a simple process to incorporate into the business accounts system. Our brokers source the suitable lender for the business.
The business determines what percentage of their invoices they would like, or need, immediately when the invoice is issued. Interest is charged on this amount so to minimise funding cost, a minimal percentage may be requested. If a larger percentage is required, this can be requested.
Invoices are issued to both the customer and the lender, the customer’s invoice will show a bank account for the lender. The lender immediately remits the agreed percentage of the invoice to the business.
When they are ready, the customer pays 100% of the invoice to the lender’s bank account. When received, the lender then remits the balance outstanding on the invoice to the business.
Interest is charged over the interim from issue to full remittance on the amount of the final payment. By strategically determining how much of the invoice value is required immediately, businesses can minimise their interest funding costs. A lender fee also applies.
This can be a very effective solution to directly address the issue of timely receipt of payment for work carried out. Allowing businesses to more easily manage cashflow and minimising the need for additional financing such as an Overdraft or line of credit.
By having funds received promptly, businesses can meet their own commitments and avoid credit history issues which can lead to problems when applying for new loans or setting up new supplier accounts.
Sourcing Targeted Finance Products
Debtor Invoice Funding is a specialist loan which is not available through all lenders. Using our expert commercial credit services, businesses can access these lenders, and this targeted funding facility. We also offer other targeted finance products including Insurance Premium Funding. This provides an effective means of dealing with large annual insurance premiums in smaller instalments.
Make 2026/27 the year you deal with the problem not the symptoms by considering available funding options to target the source of cashflow issues.
To discuss if Debtor Invoice Funding is a viable option for your cashflow problems, connect with the team of brokers 1300 000 033.
DISCLAIMER: THE SPECIFIC PURPOSE IN PROVIDING THIS ARTICLE IS FOR GENERAL INFORMATION ONLY. IT IS NOT INTENDED AS THE SOLE SOURCE OF FINANCIAL INFORMATION ON WHICH TO MAKE BUSINESS FINANCE DECISIONS. BUSINESS OWNERS WHO REQUIRE ADVICE OR GUIDANCE AROUND THEIR SPECIFIC FINANCIAL CIRCUMSTANCES ARE RECOMMENDED TO CONSULT WITH AN ADVISOR OR ACCOUNTANT. NO LIABILITY IS ACCEPTED IN REGARD TO ANY MISREPRESENTATIONS OR ANY ERRORS RE ANY DATA, SPECIFICS, POLICIES AND OTHER INFORMATION AS SOURCED FROM OTHERS.
