A lot of businesses are forced to offer a 30-day credit to their customers in order to secure their orders and attract more buyers. However, this solution often backfires on the business owners who end up waiting up to 90 days for their invoices to be paid.
Once the invoices start stacking up, the cash flow becomes seriously disrupted, and ultimately, your business becomes threatened. You start having troubles paying your own expenses, and you can’t even think about growing your business in those circumstances.
But, you don’t have to resort to risking your assets for an overdraft. There is a simpler and much better solution that is taking the market by storm – debtor financing.
What Is Debtor Financing?
Debtor financing is a facility that enables you to get a hold of your hard-earned money in as little as 24 hours. This way, your cash flow is restored, everything’s back to normal, and you can operate your business as usual in no time.
By using the service, you are basically selling your customers’ debts to the third party. When you sell something to a customer, the invoice is sent to the debtor financing service – the financier – and 80% of your money is forwarded to you. The remaining 20% minus a small fee is sent to you once your customer pays their debt.
The service is incredibly convenient because it allows you to access the funds fast, without having to supply any of your assets as security.
Who Can Benefit From Debtor Financing?
- Businesses of any scope, size and industry – Regardless of the size of your business, the industry you are in, or the number of people that work for you, your business can benefit from debtor financing. The service is based on the amount of your invoices, which means that it will always adapt to your financial situation.
- Start-ups – Those first stages of starting a business are difficult as it is, you don’t need to be burdened by any more additional expenses. With debtor financing, you can have the cash ready when you need it, and rise to any new challenges that come your way.
- Businesses that can’t get any other form of financing. Many businesses are already weighed down by taxes, which makes them unsuitable for overdraft or other forms of financing. However, debtor financing is not a loan; it’s a way for you to receive the money that already belongs to you.
- Growth-oriented businesses – If you are planning for growth, you are already facing plenty of challenges and expenses. Waiting for 90 days to get the money owed to you is the last thing you need in this situation. Debtor financing lets you focus on growth instead of worrying about finances.
- Any business that wants stability – Basically, any business that seeks financial stability and a steady cash flow can benefit from debtor financing. Using this service is not a sign of financial hardship. On the contrary – it’s a sound decision for your business.
How To Get Your Invoices Paid Within 24 Hours
You think debtor financing might be the right solution for your business? Here’s how you can leverage the facility.
- Assess Your Situation – Now that you know which businesses can benefit from debtor financing, the first step is checking if you fall under one of these categories, and deciding whether this would be a good solution for you.
See If You Are Eligible – Although most businesses offering goods or services on credit are eligible for debtor financing, some criteria need to be met. For example, only business-to-business sales on credit qualify for the service. This means that you won’t be able to apply if you are selling goods to private customers. Also, the goods need to be delivered in full for you to qualify for debtor financing.
3. Determine The Cost – As we have already mentioned, the cost of debtor financing services is a small portion of the remaining 20% of the money you receive once the debtor pays the invoice. However, this cost usually depends on the scope of your business and the risk of your invoices. So, the higher your turnover, the better deal you will be able to find. And once you determine the amount of the invoice and the percentage of the charge, you will be able to calculate the exact cost of the service.
4. Decide Between Disclosed And Confidential – There are two types of debtor financing services: disclosed and confidential. When deciding which one is right for your business, you only need to check whether you want your customers to know about it (disclosed), or not (confidential). Using debtor financing is a sound business decision that you shouldn’t be ashamed of, but if you’re still worried, confidential debtor financing will make sure your customers never find out.
5. Choose The Right Lender – There is only one thing left to do – choose the debtor financing facility that suits your business and offers the best deal. This is not such an easy task, since there are already a lot of these services available out there, and it will take you days to go through all of them and figure out which ones are reliable and which ones offer the best prices. Luckily, there are finance consultants that can help you make this decision. They have databases with all the most reliable debtor financing services, and upon assessing your situation, they will show you the best deals.
At CVG Finance, that’s exactly what we do. Our services are completely free, and we help you unlock cash flow in your business and get your outstanding invoices paid.
Click here to schedule a free consultation with us and learn what debtor financing deals we can get for your business.