Factoring and Debtor Finance Myths

Trade Debtor Finance Consultants was created so that business's get the right advice about these products at no direct charge to your firm. These products are more expensive than bank products, however the risk is higher. Banks want assets to protect their interest and in doing so tie up the directors assets in the process and well as the business assets.

Debtor Finance only takes the business asset. (Your debtors as security). This is partly the reason why costs are higher. Also most private lenders borrow their funds from a bank, so they have to pass on costs. Its not proven but a bank can regulate the lenders costs, making their own products look like a better deal.

Factoring or Debtor Finance is best used to grow your business. If your growing your business then the cost are less concerning as your using cash advanced from your business assets. Without this your business would be in a position to grow.

Basic concept is if you have a range of debtor paying 30 - 60 days and instead of waiting get paid 80% of those invoices in 48 hours with the final 20% less a fee when the debtor pays, your business would be accessing your cash to grow your business. You not borrowing moneys, your not loaning more amounts against your asset. You simply getting paid faster. If your sales ledger grows, so will your debtor finance limit and often as you get bigger it gets cheaper.

Some common statements TDFC consultants have heard are the following:

My Accountant said that is expensive and a bad idea! ( Okay, so how does your accountant what to grow your business, get more stock or staff. Remembering this product is to grow your business not pay overdue bills.)

My debtors will think I am going broke and stop buying form us!

Maybe 20 years ago when not much was know about the product, but today if directors let debtors know that your positively growing your business and this will help your business get a better buying price, which will flow back to them, you will find they will be receptive. Debtor often are only worried about the fact that a finance may chase them if they don't pay their bills. Well that is a great, but often not the case, as the invoice will be sold back to you in 90 days if not collected. In our experience, upfront explanations often stop the mind from wandering its own conclusions.

TDFC has experienced staff that can explain all the ins and outs of these products. Our firm is here to offer choice and fit the lenders to the clients needs. Often going direct you get a salesman that tells you what you want to hear. TDFC gives support for the life of the loan as no direct cost and can answer any questions you may have.

For more information please send an email to mail@tdfc.com.au or visit our website at www.tradedebtorfinance.com.au