Terms of Debtor Finance Providers
Some providers have minimum terms, exit fees, notice periods, audit requirements, etc. that need to be fully assessed prior to entering into any agreement.
Due to the involvement by the financier with a factored customer, the advance rate on such invoices is higher than with a confidential facility. In addition, some facilities marketed as 'confidential' still require completion of anonymous 'audits' before invoices are funded.
Most financiers will fund invoices for up to 90 days from the month the invoice was issued, and will 'recourse' any invoice not paid by the end of the 90 days. 120-day recourse periods are provided in exceptional circumstances.
Providers in some countries will offer a non-recourse, or limited recourse facility, where the provider assumes part or all of the credit risk on a debtor. Other providers may insist on the client taking out credit insurance on their customers, with the policy and benefits assigned to the provider.
Credit limits may also be set on individual customers to minimise risk by some financiers, and 'concentration' limits might also limit funding available to major customers, or to specific classes of customers.
An in-depth knowledge of all these issues is essential to ensure that a debtor finance partnership is with a compatible financier.
Read more about this topic: Debtor Finance
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