Financing is one of the most important aspects that each and every business entrepreneur needs to bear in mind. There are various kinds of financing techniques available to help your business get funded. But do all have the same features and are equally helpful? Certainly not, so the question is how and where you will find a loan or a credit solution that will help you to get the best for your business.

Getting a loan for small business is indeed more difficult because the loan providers are not too sure about the goodwill and reputation that the company holds in the market. Every business that performs on credit term basis with other businesses will be accumulating a substantial assets like Trade debtors or accounts receivable on the respecxtive Balance Sheets.

Defining Debtor Finance

Debtor finance refers to a type of finance that is obtained againts the commercial receivables, using them as securities. Debtor finance has several legal types. In general cases the structure of a Debtor finance resembles that of an ordinary home mortgage, where the receievable assets act as security.

Another form of the same is termed Factoring. In this case the recievables are not used as security and are rather their ownership is transferred to the financier, also called the factoring company. The process can be both disclosed to or kept confidential from the customers.

Security Requirements

Each and every kind of Debtor finance comes with some or the other kind of security requirements. The very first comes security comes over recievables, but can as well be supported by a personal gurantee or collaterals. This case isnt quite beneficial for the borrower.

It is true of any credit form that the value of the security to be used as collaterla would depend directly upon the amount of money being borrowed. However, speaking in a general sense, a debtor finance can yeild about 70% to 90% of the total value of debtor invoices.


If the factoring arrangement one is going in to is one which involves financing of the overall ledger of the debtor, if used as an overdraft will work effeciently. Such a case would imply that while functioning within the limits of the financing, along with due consideration of the bad debts, a borrower is allowed to borrow or repay an amount at any point of time he pleases to.

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