8 Reasons Businesses Choose Non-Bank Debtor Finance Over Bank Invoice Finance

 In Debtor Finance, Invoice Factoring, Invoice Finance

There are some significant differences between cash flow products offered by debtor financiers and products offered by bank providers.

I often get asked about the differences by introducers, who struggle to educate their clients.

This is natural, as much as cash flow finance has grown over the years, it is still relatively unknown.

Here is a list of some great reasons why clients tell me they choose non-bank debtor finance over bank products:

1. Speed of execution

Why are non-banks so fast in not only making credit decisions and getting cash in the hands of  clients? Here are some of the reasons I know applies to AR, and may apply to other non-bank financiers:

  • Smaller teams with a discretionary funding authority consistent with SME requirements
  • Know exactly who their chosen clients are and work that out pretty fast, giving a rapid answer
  • The funding is controlled at the non-bank’s desk, there is no need to go to a credit committee to approve a deal
  • Clients have a direct line to decision makers. This is not usually the case at a bank (for good reason).

The above four points highlight the fact that  non-bank players have very flat management structures giving you a quick result.

Not only can you get a speedy settlement, but also you get the quickest ‘no’ you will ever hear.

Having a finance provider give you a quick ‘no’, is the best thing that can happen when time is a constraint.

Large institutions prefer to sniff at a deal and let the client down slowly over a longer period using ‘weasel words’. You know you are getting the run around when you get that feeling in your gut that something is not quite right.

One other reason the non-bank will settle faster, is a healthier appetite for risk, and more willingness to audit the client on an ongoing basis. By this I mean verifying invoices.  A bank will prefer to do most of the auditing upfront and then have minimal ongoing management, perhaps only do monthly audits.

2. Specialisation

Why is specialisation so critical when obtaining cash flow financing?

Smaller debtor finance providers are stocked with highly skilled and passionate workers who love Debtor Finance.

There is often lots of old school types of people there who have gleaned much experience in the industry. This means you will be met with a high degree of experience in what you need help with.

In larger institutions you will find that they are stocked with younger less specialised staff who may or may not care or understand cash flow. In fact they may have more of a credit background and be more interested in fixed assets and the trading history of your company.

3. Flexibility

This is probably the single biggest reason clients go with us (and I think most non-bank funders) over banks.

When I say flexibility, I mean flexible in terms of advance rate and concentration.

It may not sound that important here in this article, but in terms of cash flow it is a massive positive.

4. Old School Service

Debtor finance is not by any means a perfect science. There are quite a number of commercial risks that the financier is taking that cannot be controlled.

Often the financing of invoices needs quite a bit of massaging in order to get them funded. This can sometimes go down to the wire, especially when payroll is due.

If the debtor financier is available to you directly, then you can always call in favours with them to get your working capital across the line.

This also applies with limit increases. I often have clients come into our office to request limit increases the week of which they are required. Because I am usually available for existing clients, I can quickly assess the increase and approve or decline.

5. Spread Your Panel of Finance Providers

This is as simple as not putting all your eggs in the one basket.

Finance companies (banks included) are businesses. This means they come and go just like any other type of business.

One month they may be offering finance to your type of business, the next they may not.

If you hitch your wagon to one financier (overdraft, home loan, and Debtor Finance) and they decide they hate your industry, then you have a massive problem.

However, if you have a spread of financiers, and one pulls out then it is less likely you will have to shut your doors through no fault of your own.

6. Minimal Red Tape

It is another way of saying that smaller financiers won’t make you jump through so many hoops.

7. Localised

As a small Debtor Finance provider I like to keep my clients local. I can’t always have it that way as I do have clients as far away as Perth. However, for the most part my clients and I can meet every week if need be.

For some reason, when you deal locally and face to face you are able to provide a greater level of empathy for each other’s circumstances.

With larger institutions,  sure you can deal with your local branch manager, but credit decisions are usually made in an ivory tower many kilometres away. This makes it a tough sell for a client looking to cut a flexible deal with their credit provider.

8. Focus on Debtors Not You

This is not entirely true, we certainly look into the kinds of people and businesses we are doing business with.

We prefer to do business with people who are trustworthy and honest.

However, when it comes to actual credit risk, our focus is almost entirely on the strength of your customers.

The reason why AR Cash Flow does it this way is that, for the most part, our facilities are disclosed.

This means we have a legal assignment over our debtors, making it quite a strong assignment. This also means it is legally a true sale of the receivable. This makes it more likely we can get our money back, should our client cease to trade.

Banks generally don’t do disclosed facilities. The downside for the bank is that their assignment is not necessarily at law, but in equity only.

The only thing you need to know here is that it can be harder to collect should the client cease to trade, as there could be priority issues.

For an appointment with a Product Specialist, call the office on 1300 652 158.

Watch the video and/or read the transcript below


Hi everybody, I’m Daniel from AR Cash Flow. Welcome to Whiteboard
Wednesdays. Today we’re going to talk about the tope eight reasons why
people choose AR Cash Flow over going to a bank for their debtor finance

Number one, speed of execution. We can settle a deal within a couple of
days, sometimes faster than that depending upon how many debtors you’ve
got. If you go to a bank, it can take weeks, even months to get your money.

Specialisation. We don’t have thousands of different types of products. We
just focus on cash flow and helping clients solve those problems.

Flexibility. Often a lot of time when you need a cash flow facility, you’re
business doesn’t fit into the box that the traditional financier wants to
see. However, if you are the right person and we like your business good
enough, we can make quite a few concessions to help get your deal across
the line.

Old school service. It’s best if you’ve got a small business to get your
finance from a similarly sized business to get that level of service that
you need. The big banks, they’re happy to provide lots and lots of service
to big companies. But when you’re a small business, they usually try to
wholesale that service out to you. That’s one other good reason to go with
a smaller financier.

Split panel of lenders. Well, that’s really important. Don’t put all your
eggs in one basket. Try and get your debtor finance in one spot, your
mortgage from another. That way, when you have problems in your business,
which undoubtedly every business has challenges, you have a lot more
options open to you to refinance.

Minimal red tape, of course. With a small debtor financier or a non-bank
debtor financier, we don’t have layers and layers of credit committees. It
doesn’t have to go over to Germany to get signed off or France to get
signed off. It happens right here in the office, and more often than not,
when the consultant comes out to see you, they can make a credit decision
on your business on the spot.

Localised, and this is another good reason to go with a smaller financier.
We like to deal locally. We do provide financing all over Australia. But
it’s best to deal with a funder who can get out there and get in your face
and exam your business and really get to understand what’s going on

Finally, with non-bank debtor financiers, we will put most of our focus on
the credit of your customers. When you go with a bank, they’re going to
focus not just on your customers, although they will put some weight on
that, but mainly on your history and your credit history and your credit
and your fixed assets and liabilities.

So there you have it. That’s eight top reasons. If you want to learn a
little bit more about the reasons why you go with a non-bank debtor
financier or AR Cash Flow specifically, check out the blog, subscribe to
our You Tube channel, and I’ll catch you later.

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Showing 2 comments
  • Nick

    Learning a lot from you Daniel!

    You did listed interesting points there, aside from the pricing. As to cost on the borrower, what’s the difference between a bank and a non-bank financier? Is it more costly on a non-bank?

    Thanks 🙂


  • Daniel Dunsford

    That is a really good question.

    I must re-iterate here, that the terms of a bank facility will be vastly different to a non-bank.

    Because of this they can certainly make their product seem slightly cheaper.

    Generally, you get what you pay for, and the bank will get their cut of your profit from somewhere. Either out of something else they sell you or by not taking as much risk.

    True “stand alone” facilities cost what they cost, and decisions are best made around ‘terms’ that are important to each particular client (not so much pricing).

    I really appreciate your comments here Nick! Thank you.

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