5 Reasons SMEs Should Apply for Debtors Finance

5 Reasons SMEs Should Apply for Debtors Finance

Post-COVID, a lot has changed in the business world across all geographies.

Enterprises, especially in the SME sector have been compelled to reboot their infrastructure to stay relevant in the new normal. The strict compliances and loan policies of the traditional financial institutions are hardly making it any easier for them. Hence, small and mid-level business owners are seeking reliable private financing options to fulfil their cash flow needs. On that note, we will discuss debtors finance and why an enterprise should think of applying for it.

What is Debtors Finance?

Debtors finance allows enterprises to access financing capital by pegging the accounts receivables. You can get up to 90% of your accounts receivables to boost cash flow. The lender puts a credit limit for the same. You can use the limits against your accounts receivables ledger.

Why Should You Apply for Debtors Finance?

There are multiple reasons why a business owner should seek debtors finance.

We can give you the top four reasons they do.

1. You don’t have to put an asset as collateral The lender releases the funds, taking your existing accounts receivables ledger as security. So, there is no need to put your asset (real estate) as collateral for loan approval up to a certain amount. The receivable debtor’s book acts as the security against the loan amount. Hence, there remains no risk of losing your asset.

2. The limit is flexible The credit limit is dynamic. It means that as your business grows and you generate higher invoices, your credit limit will grow as well. You can receive up to 90% of the accounts receivables ledger.

3. Credit history does not matter You get the loan amount based on your current financials, not your credit history like other loans. So, even with a poor credit score, you can apply for the loan against the accounts receivables. This is one of the main reasons people prefer debtor’s finance over secured/unsecured loans and other financing options.

4. Balance sheet ratio improvement It is instrumental in helping small businesses grow without incurring the liability of massive debt. The short term loan helps business owners improve their debt to income ratio.

Conclusion If your business is going through a cash flow crisis due to unpaid invoices, or any other reason, debtors finance can help. You can use your receivable’s ledger to acquire significant funds to revamp your business and maintain continuity of operations by paying the suppliers, fast track production, etc. For business owners who are sceptical about the credibility of a private lender, you can get guidance from reputed finance brokers like Broc Finance. Their experts will assess your financial emergency and connect you with a vetted lender for loan approval and funds access.