Cash Flow Lending
Debtor finance, also known as factoring or invoice funding, is essential for those with payment terms after supply.
As an example: If a manufacturer receives a purchase order from a major supermarket they may be on terms of 180 days, but their suppliers could demand payment in 45 days. Factoring will finance a percentage (commonly around 80%) of the invoice value on the day it’s issued. This allows the manufacturer to pay their suppliers and wage costs in order to fulfill their order. Interest is paid on the 80% until it is paid by the customer, in this example the supermarket.
Not all invoices need to be funded so clients can manage their costs and their cash flow in a flexible manner.
This is a lending product that is offered by some banks and specialist lenders. Because of this it’s important to work with a credit advisor with the right relationships to ensure you get the best possible terms and the limit that suits your business cash flow needs.