Frequently Asked Questions
Its what your looking for
Debtors Factoring Is a way of providing capital to accelerate cash flow and combines flexible finance linked to turnover, with a professional Debtor Administration and Credit Management Service.
Factoring of this kind does not involve borrowing, it simply advances cash which is due to you; it effectively converts credit sales into cash sales and includes a full debtors management system.
How does Debtors Bridging work?
A contract is entered into where the business agrees to factor its credit sales ( bridge invoices) to the bridging company, who will advance up to 80 % of the invoice value immediately (limited to those that have proof-of-delivery).
Monthly statements are sent to the businesses customers reflecting amounts due and payments made.
Professional credit controllers administer the sales ledger, assess customer creditworthiness, attend to credit control and debtor administration, ensure collections are received, institute legal action where needed and offer a comprehensive sales and related management service.
Benefits of Debtors Factoring :
Cash made available for expansion
Increased sales potential
Increased margins and improved credit rating
Management time better utilised
Lower bad debts
Improved return on capital:
Expansion without loss of equity / control
Debtors aging improved.
Increased Working capital
Improve Cash FLow
Administration fee: From 0.5% to 2.0% of turnover, covering sales administration but dependent on the number of transactions involved and the value per invoice.
Discount fee: A discount (interest) fee of between 1.0% to 2.0% above the ruling Prime Bank Overdraft Rate, effectively on the amounts advanced
When is this a desired facility :
- When sales need to be expanded and you need to have cash is available to funds this growth
- When there is a need to evaluate potential customer’s creditworthiness.
- To remove an administrative burden and free your team to concentrate on sales
- To retain ownership of your business as it grows.
- To take advantage of early and bulk settlement discounts
- When better control over debtors and granting of credit is needed
Debtors Discounting / Debtors Bridging
Can debtors discounting be used to fund work in progress.
Yes. Cash advances received for previously completed can be used to fund Work In Progress.
Is there a minimum debtors book size:
Yes genially a debtors book of less then R 500 000 is not feasible for debtors discounting. It would be bet to use single or selective invoice factoring.
How long am I locked in for:
Normally this facility is renegotiated after 12 months.
Who controls the process:
You the client are always in control. The management team takes is instructions from you especially wrt defaulting customers but the bridging company take the day to day operational burden off you.
What happens if a client does not pay :
They are given notice to pay and then you are advised. If you wish further stronger action then this is actioned. If the client completely defaults after all actions have been taken, you will ultimately be responsible for the debt. The Debtors Discounting company merely manages your book for you. The profits and losses are for your account.
How much can I get :
UP to maximum of 80 % invoice value immediate and balance ( less discounting costs) once your client settles his account.
A typical scenario:
ABC factory has made shoes and has delivered them to its customer, the retail shoe shop. ABC has granted the retail shop 90 days credit but ABC factory needs its money now. Invoice bridging / Invoice Factoring / Invoice Discounting is when the bridging company advances up to 80 % of this money to ABC factory and then collects the money from the retail shop in 90 days time. The fee for the period the money was lent out, is deducted from the 20 % still due to ABC factory and the difference is paid to ABC factory.