10 reasons why SME’s should consider using debtor finance
Why should businesses consider using debtor financing
During the past 5 years Australian business men & women have experienced sustained growth in the domestic economy. This environment has given them confidence and presented opportunities for expansion of their business operations, growing sales or alternatively making acquisitions
During the planning process for any of these initiatives business people need to consider how & where they will generate working capital or funding to ensure these decisions are progressed successfully.
Debtor Financing is becoming an attractive option for business people in these circumstances when you consider the following reasons why it may fit the businesses needs;
- Steady reliable cash flow provided within 24 hours of receipt, access to cash of up to 90% against the value of outstanding invoices even though debtors may not make payments for up to 60 days
- Payments of the businesses liabilities can be made on time; Cash flow is the life of any business, particularly ensuring payments to creditors are made promptly & without the stress of business owners trying to find cash
- Growing sales by offering clients extended credit terms; Debtor finance is a strategic solution for business owners who target growth through credit sales as the ongoing supply of cash is linked to sales. So as the business grows, the amount of funding grows too.
- Buying power; with a reliable cash flow supplier rebates can be maximised.
- Assist with purchase of a business or cash flow during the transition stage debtor finance results in cashflow that’s aligned with the businesses performance and growth, rather than being dependant upon personal liquidity of owners
- Outsourcing of accounts receivable; An additional service of factoring is chasing the unpaid invoices. This eliminates the need to perform the accounts receivable function, allowing management to focus on other important arrears of the business
- Not tying up personal assets; Debtor finance does not require owners to tie up their personal assets, like property, it relies solely on the businesses assets
- Non bank attitude – flexibility; Organisations, like Bibby, specialise in debtor finance, are proudly independent to banks and offer a range of solutions to meet any business structure or financial position
Regrettably from time to time businesses experience problems with their trading or often through no fault of their own encounter major road blocks, like the loss of a large client, which severally affects its financial performance. Company’s like Bibby, with a long trading history, know what’s its like to be in business. People in these circumstances should consider the debtor finance alternative as;
It offers a strategic reliable line of funding for businesses as they go through the painful process of restructuring
- Can free up cash tied up in unpaid invoices allowing businesses to pay trade creditors or statutory liabilities like the ATO
- Bibby’s Lending criteria’s are more flexible than banks, as a result obstacles like trading losses can be worked around rather that used as an excuse not to assist
Debtor financing is a longstanding major financial tool used by business owners in Europe & the USA for funding their operations. This valuable facility is gaining more & more acceptance in the Australian domestic market as a viable option for SME’s.
Latham Moore is an authorised partner of Bibby Finance and can assist you with developing the right product for your business.
Please contact Latham Moore for further information on 1300 733 590