Debtor financing

What is debtor financing?

Debtor financing is a form of financing in which a company borrows money based on the value of its outstanding invoices. The company sells its invoices to a finance company or factoring company in exchange for an upfront payment on the amount of the invoices minus a fee for financing costs. In this way, the company can access the money it needs to continue its operations and grow faster instead of waiting for customers to pay their invoices. Debtor financing can be especially useful for companies facing longer payment terms or irregular payments from customers. It is an alternative source of financing to traditional bank loans or business loans.