Debtor finance funding options

As more brokers become aware of the opportunities debtor finance can offer their clients, it’s important for the industry to support them with insights and information to ensure that the time brokers invest will be productive. The focus of this blog is to help brokers identify the industry sectors and business situations for which debtor finance represents an ideal funding solution. Finance brokers who understand the offering and which clients it will suit can benefit both by deepening their client relationships and growing their own revenue streams via trailing commissions.

Here's an overview of the types of client who would most benefit from debtor finance:

Industries to keep on your radar

The biggest users of debtor finance – because it suits their business model – are SMEs and start-ups in temporary labour hire, recruitment, transport, manufacturing, wholesale/distribution, printing and business services.

Debtor finance is for businesses that sell products or services to other businesses on standard trade credit terms, funding business growth and expansion. It is an ideal solution for businesses that are turning away orders and forgoing growth opportunities because they can’t fund them.

Some specialist debtor financiers also offer trade finance, which is an ideal cash flow accelerator for importers, helping meet the costs of bringing a product into the country.

High growth businesses have a lot to gain

Debtor finance is ideal for growing businesses, providing the capital required to fund growth.

A great example is Australian SME Ribs & Roast, a national steakhouse supplier that also has retail lines with many large national supermarkets. Two years ago, the business was struggling to keep up with orders as demand was outstripping capacity at their Sydney factory.

According to Ribs & Roast general manager Ryan O’Shea, debtor finance allowed the business to cope during a period of great growth (50 to 60 per cent growth month-on-month).

“Our broker recommended debtor finance as the most effective way to fund the growth we were experiencing, and the facility allowed us peace of mind around cash flow while we transitioned to a bigger factory,” he says.

As the business grows, the debtor finance facility (unlike a typical business overdraft) automatically grows with it. Debtor finance is one of the few forms of finance with this flexibility.