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Joe R.
Joe R.
Greenwich, NSW

I run my own business and a mate of mine suggested I speak to someone about debtor finance - can you give me an idea of how it works?

5 years ago


Debtor Finance is simply a cashflow solution for a business. If, for example, your business has outstanding invoices a debtor finance solution will advance you up to 85% of the value of the outstanding invoices and the funds tend to paid into your bank account within 48 hours.

The business who advances the funds will then receive the payments from your clients in accordance with your normal payment terms. When all the payments are made the funder will deduct their fees from the remaining 15% and pay you the difference.

The significant benefit to you is that you receive 85% of your outstanding invoices upfront instead of having to wait 30,60 or 90 days for your clients to pay you. This provides you with cashflow to continue to grow your business. I hope this helps


Hi Paul,

How does this work for small businesses with perhaps not as many assets to provide security to the bank? Is this still an option?


Essentially Debtor Finance allows you to utilise money you have invoiced before you've actually collected the money from your client. it's useful for businesses who provide 30+ day credit terms to their customers.

essentially the bank will loan you the amount of the invoice on the provision you will pay it back once you receive the money from the customer. obviously there is some interest added to the repayment which is how the lender makes their money.

if you are having problem collecting debts, you could look at accessing trade credit insurance to protect yourself against defaulting customers.

The other answers explain it so won't rehash. What makes it hard to get debtor finance- concentration in too few debtors, unsuitable debtors, bad credit management policies of practices on your part. There is an expanded answer but best you talk to the Commerical finance brokers.

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