What is Debtor Finance?

Debtor finance refers to a financial strategy where a business utilizes its accounts receivable ledger, or the outstanding invoices owed by customers, as collateral to secure funding. This approach is particularly beneficial for companies experiencing low working capital reserves, which can lead to cash flow challenges, especially when invoices are subject to net 30 payment terms. By financing these slow-paying invoices, debtor finance solutions enhance a company’s cash flow, enabling it to more effectively manage and meet its operating expenses.

There are various types of debtor financing solutions available, including invoice discounting, factoring, cash flow finance, asset finance, invoice finance, and working capital finance. Each of these options provides a mechanism for businesses to unlock the value tied up in their accounts receivable, thereby improving liquidity and financial stability.