Debtor Finance goes by more aliases than the FBI’s ten most wanted.
If the intention was to create confusion amongst the general public then the evil plan has been a great success.
Sadly, there is no evil plan – just the confusion.
Debtor finance sometimes travels by the name of invoice finance, at other times it can be called receivables finance or cash flow finance. Terms such as factoring, invoice discounting and spot factoring are also bandied about.
So, let’s add some clarity.
To put it simply, debtor finance is a generic term which describes the practice of selling unpaid invoices to a finance company so that instead of waiting weeks and months for your customers to pay you can have the cash in your bank account from day one – or close to it. (Please note: This doesn’t mean selling invoices which are overdue. No debtor finance company wants to deal with late payers.)
There are a number of variations to debtor finance and lenders may market their products using terms which describe the variations. The three terms below represent the main types of products in the debtor finance family.
There are other innovative products based on the debtor finance model. These include:
Lenders range from major banks to large specialist finance companies and small local financiers. A finance provider is unlikely to have all facilities and won’t provide you with the choice you need to make the right decision. You might event be shoehorned into a product which is unsuitable for you needs, so it is important you know how these facilities differ and which suit you.