Debtor Finance - Security Requirements

Security Requirements

Security requirements vary, but traditionally focus on the value of the debtors ledger, supported by a pledge of specific assets as collateral and a charge or mortgage over the business, along with the personal guarantees of directors. Apart from some specialised lenders, real estate security is not taken. By focusing on the value and collectability of the accounts receivable ledger, most debtor finance credit lines will automatically increase in response to increases in sales, and provide ongoing working capital to fund the growth of the business. Typically the advance rate ranges from 70% of accounts receivable ledger value up to 90%. The remaining 30% to 10%, known as the 'retention' is released following receipt of payment of each invoice by the customer/debtor/buyer.