What is the purpose of Debtor Finance?
A business requires capital on an ongoing basis to fund any cash-flow gap between paying suppliers / employees (outgoing cash) and receiving customer receipts (incoming cash). Additional working capital is often required to help fund growth into new areas or seasonal fluctuations in trade. For most companies, their outstanding invoices (often referred to as ‘debtors ledger’) are by far their greatest asset – but it often converts to cash at a much slower rate than they would like. If debtors are paying their invoices at a slower rate than the business needs funds to purchase stock to grow, this can present recurring cash flow problems. A typical situation is when suppliers require payment on 7-days terms, while customers pay at 30-days. This leaves a gap in funding, which can be difficult to manage, especially if the business is experiencing growing demand. Debtor Finance can solve this problem.
