How debtor finance works: A step-by-step guide

December 17th, 2013

If you're a small business owner, you'll understand just how important maintaining a healthy cash flow is to your organisation.

Your employees and overheads simply won't wait around to get paid - if you don't have the cash in hand to take care of these and other expenses, you're bound to struggle.

That's exactly why debtor finance is such a popular source of small business finance. Tailored especially for smaller companies who may not always have the means to maintain their cash flow, debtor finance is an affordable, quick and safe option that helps you keep moving and growing.

Here's a step-by-step guide on exactly how the debtor finance process works!

1. You deliver a service or product to a customer

The process begins when you make a sale to a customer and they receive the goods. It doesn't matter if it's a product or service - the important thing is that it generates an invoice you can then assign to a debtor finance company.

2. You send an invoice to the customer and a debtor finance company

While sending out an invoice to your customer is a given, make sure you also raise a copy to your debtor finance company, who can then initiate the next step.

3. The debtor finance company sends you an advance

Once the invoice details have been received and verified, the debtor finance company will advance you up to 80 per cent of its value. One of the greatest benefits of this process is speed - you can generally expect to receive the cash in your account within 24 hours.

4. Your business uses the cash

Once you receive the cash, it's yours to use as you wish. This means you can work off some of your debt, pay your staff's wages or purchase new supplies. Meanwhile, the debtor finance company will chase up your customer for the outstanding invoice.

5. You receive the remainder of the invoice

Once the debtor finance company has received the payment from your customer, they will send you the remaining 20 per cent of the value of the invoice minus a small fee.

If you think that your business would benefit from Earlypay's easy-to-use debtor financing facility, please call 1300 760 205 or email our friendly team on [email protected].

If you'd like to learn how Earlypay's Invoice Finance & Equipment Finance can help you boost your working capital to fund growth or keep on top of day-to-day operations of your business, contact Earlypay's helpful team today on 1300 760 205, visit our sign-up form or contact [email protected].