This explanation is generic and not specific to any one provider, however the procedure is approximately as follows:
▪The provider typically wants the full sales ledger (except COD sales).
▪An in-house credit application process should be in place, which involves doing a credit check. The provider will usually undertake a search on customers prior to approving them for inclusion in the facility.
▪Invoices are sent to the provider at the agreed intervals (usually weekly, or whenever there are fresh invoices) for funds to be released.
▪In addition to the normal trading bank account, there is a separate bank account in the company name that is part of the facility, and customers must pay into this bank account. Read only access to this account is available to see who has paid.
▪There is also a line of credit account for the facility, ie. the value of the funds advanced.
▪Each day the provider will sweep any debtor funds received via the debtor finance bank account into the line of credit account to reduce the balance. The line of credit account will reflect the total amount advanced at any time.
▪A draw-down can be requested up to the value of the balance available on the facility, eg. the agreed limit of the facility is $200,000 but the current liability is only $150,000, so based on funds paid by customers, request up to $50,000 to be transferred to the trading bank account. |