Frequently asked questions about debtor finance

A business requires capital on an ongoing basis to fund any cash flow gap between paying suppliers or employees (outgoing cash) and receiving payment from their customers (incoming cash). In addition working capital is often required to help fund business growth or seasonal trade fluctuations.

For most companies, their outstanding invoices (often referred to as ‘debtors ledger’) are by far their greatest asset, but if debtors are paying their invoices at a slower rate than the business requires those funds to enable growth, it can present recurring cash flow problems. This situation typically arises when suppliers require payment between 7-15 days, but their customers pay at 30-60 day terms. This leaves a gap in funding, which can be difficult to manage. Debtor Finance can solve this problem.

• Businesses can have up to 90% of the value of their invoices available for use within 24 hours;
• It offers a credit line flexible enough to satisfy projected and seasonal sales volumes;
• The business can retain complete control over its debtor relationships – managing their customers’ accounts and carrying out their own collections; and
• The relationship between the business and the financier can be completely confidential.

The interest rate is determined by a risk-based assessment of the business and the quality of its debtor book. Borrowing rates are generally comparable to prevailing overdraft rates.

Debtor finance provides funding based primarily on the value of the business’s outstanding invoices, with no requirement for bricks and mortar security, which means:

• More flexibility – funding is made available in line with sales volumes and the facility is negotiated to support sales forecasts, and is not just based on sales history. An overdraft often needs to be renegotiated annually, meaning that, year by year, a business experiences a degree of funding uncertainty.
• More funding – up to 90% of invoice values can be advanced through debtor finance, whereas an overdraft facility is often based on a maximum of 50% of a business’s debtor book.

Small to medium-sized businesses, which are registered companies, with an annual turnover of between A$1 million and A$75 million. They must provide goods or services to other businesses and preferably have a diverse base of revolving debtors. Liberty will approach any application with a view to assessing how we can make the deal work. Industries which are best suited to debtor finance include:

• Manufacturers – food & beverage, household products, other sub sectors;
• Commercial services and supplies - employment services, commercial printing, other sub-sectors;
• Transportation – freight, logistics, other sub-sectors;
• Health care equipment and supplies; and
• Telecommunication services.

Complete our application form, which should include details of your company’s incorporation, location, activities, directors, shareholders, financial performance and a summary of your debtor book. Supporting information should include:

• Latest management accounts;
• Last 2 years’ financial statements;
• Last month-end aged debtors ledgers;
• Sample invoice;
• Last month-end aged creditors ledger;
• Information regarding adverse trade, finance or tax defaults / judgements; and additional information will be required as part of due diligence.

More information about Debtor finance is available from our dedicated sales team on 13 23 88.