Debtor Finance

Learn how debtor finance works with Skippr

What is debtor finance?

Debtor finance is a type of short term borrowing that lets businesses unlock cash tied up in unpaid invoices. Rather than having to wait for those invoices to be paid, debtor finance can release those funds upfront and they can be used to fund business growth.

Debtor finance typically acts as a line of credit and businesses can draw up to 80% of their accounts receivable ledger. When the invoice is paid, the extra 20% is either paid back to the business or used to pay off your loan balance.

Repayment
When your customer pays the invoice
Charges
Interest 8-15%
Fees 0.75% - 1.5% per drawdown
Speed
Same day funding
Collateral
Invoices are the security

Pros

Don't need to wait for the invoice to be paid to receive funds
Invoices are collateral not real estate property
Based on credit of your invoiced businesses
Flexible access to funding

Cons

Costs may be higher than real estate backed finance

Who qualifies for debtor finance?

Businesses that have outstanding invoices with other businesses can qualify for debtor finance.

Your customer invoices are the main security for your loan so the amount of money you can borrow depends a lot on the amount and quality of your invoices. The creditworthiness of your business including things like revenue, existing debt levels and the time you have been in business is also important.

What you need to qualify

A valid ACN
More than 12 months in business
Invoices with other strong Australian businesses
Invoices are only issued after goods or services are delivered
At least $1m in annual revenue
Minimum of 3 customers
You use Xero, MYOB AccountRight or Quickbooks

How do you apply for debtor finance?

Applying for debtor finance with Skippr is a quick and easy online process. Simply sign up to Skippr and connect to Xero. This allows Skippr to securely view your accounts receivable ledger and some other relevant information. Additionally, we may require the following:

Certified Photo ID

A driver's license or a passport

Bank Statements

Access to the last 6 months

ATO Statements

ATO Integrated Client Report

Credit Scores

Credit Score Report

How does debtor finance work?

Wouldn’t it be nice if customers had reasonable payment terms and always paid on time? Unfortunately, that’s rarely the case which is why debtor finance has been used by businesses for thousands of years and is becoming a much more common in Australia.

Having reliable access to cash flow is essential for any growing small business. Whether it’s for paying suppliers, your employees, investing in equipment or stock or simply having the confidence to take on that big new order, having cash available when you need can ease a lot of the stress of being a small business owner.

How debtor finance helps cash flow

Debtor finance lets you unlock cash from your unpaid invoices. Rather than waiting for your invoices to be paid, you can smooth business cash flow by bringing forward some of the funds you are owed. These funds can be then used for business operations or to invest in growing your business.

How does debtor finance with Skippr work?

By connecting the Skippr platform to Xero, your accounts receivable ledger is updated in the platform as invoices are raised and paid. Your available funds are up to 80% of eligible invoices which are customer invoices that are in Australian dollars, 90 days or less past the issue date and with customers of good credit quality.

The Skippr platform lets you draw funds with a click of a button and you will receive funds in your account the same day. The platform also has a simple and easy-to-use receivables management tools to help you get your invoices paid sooner so you aren’t paying more interest than you need to be.

Your customer invoices will be paid into a new collections account set up by Skippr and payments will be used to pay off your loan and any excess will go to the operating account of your business. Bank feeds from this collections account will be connected to your Xero and Skippr will post transactions relating to drawdowns and repayments back to your Xero so you can reconcile bank transactions with one click.

Find out more about how Debtor Finance with Skippr can solve your cash flow problems and book a meeting with us today.

What will debtor finance cost you?

If you are prepared to offer your home as security for a business loan you will almost always get the lowest cost of funding for your business. The other extreme is unsecured business loans where no security is taken and lenders have to charge more for the additional risk.

In between real estate secured loans and unsecured business loans sits Asset Based Finance. This is where a borrower uses an asset on the balance sheet of the business as security for a loan. Common examples of asset backed finance are vehicle finance and equipment finance. Debtor finance is another example of asset based finance. By using your accounts receivable ledger as collateral, you can lower your cost of funding without having to mortgage your home.

When is debtor finance worth the cost?

Debtor finance is generally more expensive than a loan secured by real estate but many business owners do not want to mortgage their house for the business so it can be a good alternative. Debtor finance is also more flexible and less expensive than business loans as business owners can draw funds against invoices only when you need a cash flow boost and you will not be paying interest on funds you don’t need. Debtor finance is also repaid when your invoices are paid and not regular repayment periods which a lot of borrowers like.

The funding flexibility that debtor finance provides not only provides the peace of mind knowing that cash can be unlocked from the ledger when required, it can also give business owners the confidence to invest in their business and take on new orders knowing that funding them won’t be an issue.