Almost every business needs a reliable source of external funding. Working capital and cash flow issues are some of the most persistent problems facing Australian small to medium enterprises (SMEs). These issues are exacerbated for SMEs that sell their goods or services to other businesses on credit, as they rely on their customers to pay their invoices on time. Australian companies have a culture of paying late, so a finance solution that solves this problem appeals to any SME in this position.
Debtor finance is precisely that solution. Debtor financiers will fund your business using unpaid invoices as security against a flexible line of credit. SMEs are beginning to understand the benefits of a scalable facility that grows when their business does. The right debtor finance service may be one of the most significant assets to an expanding business, allowing you to pay your bills, secure new suppliers and invest in new growth opportunities. It’s often underappreciated, so consulting an expert is your best bet to get the most out of your finances – debtor finance brokers to the rescue!
A great debtor finance broker is your best friend
An experienced, knowledgeable business broker is an asset to any SME. This is particularly applicable to debtor finance. As a less well-known and underutilised financing option, you need a professional in your corner that specialises in the finer details of debtor finance. The benefits you get from a regular business broker are amplified by a specialist broker that knows what they’re doing.
“Brokers are impartial about sourcing you the right deal and benefit from repeat business.”
The right broker for you will look to build a lasting relationship with your business. They’re impartial about sourcing you the right deal and benefit from repeat business, so they have your best interests at heart. Brokers have the skills to represent your business favourably to lenders, provide unbiased advice and negotiate on your behalf to leverage the best terms for your success. Debtor finance brokers are available when you need them, ready to assess your financial position and the best suitors – much like your scepticism of your daughter’s new boyfriend, they know exactly what to look out for:
Great customer service
One of the most important aspects of a debtor finance provider is their level of customer service. Unlike business loans, line of credits and credit cards, you will deal with your provider on a regular basis. They need to be able to reply to your emails, messages and calls in a timely and prompt manner. Speed is of the essence when it comes to an effective debtor finance facility as your customers may be contacted and you need to manage that relationship effectively. Experienced brokers know which providers will be best suited to your flow of work, invoices and cash flow needs.
Your suitability and the best type of facility
Debtor finance brokers are usually a whole lot more than just that. As a partner to your business, they’ll sit down and help you ascertain the best opportunities for your unique situation. It’s possible that a debtor finance solution either isn’t the right option for you right now or perhaps there are other options that may benefit you alongside it. Brokers will tell you what they think is best, not what’s best for the lender’s bottom line.
When it comes to debtor finance, there are two main types of facilities on offer – disclosed and undisclosed. The difference boils down to three main components that a disclosed facility includes:
- An establishment letter is sent to your customers.
- Verification calls are made intermittently.
- A notice of assignment is attached to each invoice.
An undisclosed debtor finance facility is usually accessible to larger businesses and may be a superior solution when it comes to maintaining the relationship with your customers. A broker will help you assess which option is best for you.
The terms of the facility
Just as the broad type of facility is important, so are the nitty-gritty details. As with any other type of loan, there are lenders that charge minimum fees, upfront charges and ones that don’t. There are also financiers that lock you to a 12-month term (or longer), meaning any deal is a more involved commitment. Your broker will help you decide what’s right for you. If you’re unsure, there are short term options available, such as selective or spot invoice factoring. These options allow you to test the waters and see what it’s like to factor just one or a few of your invoices without committing.
Growth avenues – debtor finance is scalable
A great debtor finance broker will develop your relationship and be a trusted point of contact when assessing your options in the future. Debtor finance is a scalable solution that grows as your business does – as you raise more invoices, the more funding you can source. If you outgrow your facility, your broker can help you find a new one on better terms.
Capital Plus Finance is an experienced debtor finance broker that has your business’s best interests at heart. The Capital Plus Finance team will do everything we can to help you secure a suitable finance solution, whether that’s debtor finance or an alternative. Please give us a call anytime to find out more or to have an obligation-free chat about your funding situation.