What is Trade debtor finance, Full Service Factoring, or Invoice Discounting?
Trade Debtor finance, Invoice Discounting, or Full Service Factoring is where a business sells all or part of their debtors’ ledger (Unpaid Invoices) to a financier to raise working capital (Cash) for expenses, wages or fuel. How does debtor finance / factoring work? As a business delivers its goods/services to its customers, the invoices (trade debts) raised can be sold to a financier. The Financier would advance up to 80% of the un paid invoices value within 24- 48 hours. The remaining 20% is advanced after the invoice is paid less a small fee of about 1-3% to the financier. The business simply forwards copies of the invoices to the financier. Once verification of invoices is complete funds are advanced. The business can retain control over accounting functions and collections or they can opt to for the financier to control this function. What are the benefits of debtor finance / factoring to a small business? Trade Debtor Finance offers the business flexibility, as the following ben
