Small to medium enterprises (SMEs) secure funding through various methods. Traditional solutions, such as business loans and lines of credit, are useful, but also they have their disadvantages. Deciding how to finance the growth of your business is not an easy job. However, in recent years one of the most popular financing facilities for successful SMEs has been debtor finance. It offers a range of advantages – instead of providing your personal property as security, or paying out the nose to land an unsecured business loan, debtor finance offers a way for your business to leverage unpaid invoices.
Debtor finance is an excellent solution for many SMEs. It can be used to pay off other high-cost debt, reduce your monthly repayments, and may increase your access to capital while lowering the cost, resulting in a healthy boost to your business’s cash flow. Opening a debtor finance-backed line of credit not only helps your business grow, but it also serves as a safety plug if something happens to your business. Here are some of the numerous advantages of using debtor finance.
Debtor Finance Can Fuel Business Growth
One of the factors that limit business growth is restricted cash flow. Debtor finance helps SMEs source the cash they need to fuel their business’s growth plans and investments. By forwarding funds based on your outstanding invoices, it turns unpaid invoices into cash on hand. Of course, instead of waiting for payment from the debtor, you can use this cash immediately to grow your business – such as buying new equipment, investing in new staff, and any other relevant purposes. As your business grows, you’ll have more sales (and outstanding invoices) that will, in turn, generate access to additional funding.
Debtor Finance Helps with Cash Flow Problems
Running a small to medium business means you need to have access to steady cash flow. Using debtor finance can help SMEs with their cash flow problems by bridging the cash flow gaps caused by late payments, low profits, seasonal demands, and much more. No more extended periods of waiting time for your overdue invoices! Having payments from debtors delayed for months can have a severe negative effect on your daily and monthly operations, not just your business’s future growth.
Debtor Finance Gives You Fast Access to Cash
Debtor finance is often approved in just a matter of days. Once the facility is in place and active with your provider, cash will readily be available within 24 hours. Fast access to funds via debtor finance gives your SME the assurance you need to restock, pay employees, invest in customer-facing digital technology and marketing, and so on.
You Maintain the Company’s Ownership
Debtor finance has no control over your business or how you run it. Your invoices secure the facility, so there may be limits in place in regards to which customer invoices you can fund and which ones you can’t. However, you can still manage your business and collection process the way you want to – you retain ownership. This is important, especially if your business is growing. You simply have to ensure your provider gets paid or your future borrowing capacity may be limited, and because there is no property security required your home is never at risk.
You Retain the Profits
Similarly, getting help from a financier helps your business remain operational at all times. If your SME can operate efficiently and, you’ll retain your profits. This is beneficial compared to equity financing, where you are required to share your profits with any additional equity holders you bring on board. Furthermore, since debtor finance is a secured option, it’s usually a lot cheaper than accessing an unsecured business loan.
It’s a Scalable Financing Solution
One of the most critical advantages of debtor finance lies in its flexibility. Unlike most other solutions, debtor finance scales (up and down) alongside your business. Throughout periods with higher sales, you’ll have access to more funding.
“You’re not locked into an expensive loan where you have to make payments regardless.”
When things slow down, you’re not locked into an expensive loan where you have to make payments regardless of your situation. If you don’t utilise the facility, you don’t pay. Debtor finance is flexible and can be used to address specific cash flow gaps. Through this, SMEs can maintain and improve their profit margins and obtain the working capital they need to grow their business.
The benefits of using debtor finance can be achieved as long as you use the funds in the right manner. Take debtor financing as an opportunity to avoid having a stagnant business – it’s an excellent tool for growth! Check your options and unlock tomorrow’s cash today with OptiPay.
Who is OptiPay?
OptiPay, one of Australia’s leading business finance providers, has been dedicated to helping small business owners solve cash flow challenges for over a decade and has provided $1.5 billion in business funding to more than 500 Australian businesses. OptiPay specialises in modern financing solutions such as invoice factoring, invoice finance, debtor finance, and lines of credit. OptiPay’s mission is to support business growth providing liquidity in as little as 24 hours, ensuring they have access to tomorrow’s cash flow today. This rapid access to funds helps businesses maintain smooth operations and seize growth opportunities without the stress of cash flow constraints. At OptiPay, we believe that healthy cash flow is the lifeblood of any successful business. Our commitment to helping businesses overcome financial hurdles and achieve their growth ambitions has solidified our reputation as a trusted partner in the business finance sector. Whether you are looking to stabilise your cash flow, expand your operations, or navigate financial challenges, OptiPay is here to support your journey with innovative and efficient financing solutions.
