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What is invoice discounting?

Myles

Author: Myles Robinson - Advisor

Posted: Jun 8, 2022

What is invoice discounting? Full guide on rates, pros and cons and how to apply

Invoice discounting refers to a type of invoice financing where unpaid invoices can be used as collateral for a loan. Businesses can leverage their sales ledger’s value by using invoice discounting companies.

An invoice discounting company will send invoices to customers and a portion of the total amount is available to the lender. This provides working capital for your business throughout the month, while you wait for payment.

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Invoice discounting has the advantage that you retain control over your sales ledger, as well as your invoice processing and payment chasing.

This method is different from invoice factoring in that the customer doesn’t know that you have taken out cash flow finance. Invoice discounting is a good option if you want to keep your customers in the dark about the financial arrangement.

You don’t have to wait for payment for goods or services anymore.

You are still in control of your credit control and will continue to chase late payments. Customers won’t be aware that you are involved.

We deal with the simplest and most complex cases invoice discounting

We have access to over 25 invoice discount lenders in the UK to get you the best rates

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What is invoice discounting?

Small- to medium-sized businesses can find it difficult to get customers to pay their invoices. Invoice discounting is a solution.

Businesses can access cash held in unpaid invoices immediately and get into their sales ledger by using invoice discounting. It is simple: When you invoice a client or customer, you get a percentage from the lender. This provides your business with an increase in cash flow.

What is invoice discounting?

Another way to view invoice discounting is to see it as a series of short-term loans using invoices secured. The lender knows you owe the money and will lend you the majority of it before the customer actually pays you.

What is confidential invoice discounting?

Invoice discounting is confidential. It’s sometimes called “confidential invoice discounting”. Customers won’t be able to tell that you are using a finance provider. This has the downside that you will still need to chase down invoices, unlike invoicing.

Bank invoice discounting vs. Invoice factoring

Factoring and invoice discounting are similar, but there is one major difference. Factoring allows customers to know that you are in receipt of financing.

The lender typically handles your credit control and sales ledger. They’ll also chase late payments on your behalf. Invoice discounting, on the other hand, allows you to maintain control over all communications and customer services.

Medium-sized businesses can borrow money against unpaid invoices to get invoice discounting facilities. Invoice discounting facilities work best for B2B companies that offer long credit terms to clients.

Boost cash flow quickly

Invoice discounting has the greatest advantage: it can increase cash flow. Many businesses across the country struggle to balance their cash flow. This is often not due to low revenue but late payments from customers.

All forms of invoice financing are designed to allow you to pay your invoices immediately. You don’t have to wait for 30 days, 60 or 90 days to get paid. Your finance provider will pay you the majority of the invoice’s value, usually around 85%, once you have delivered and raised the invoice.

The cash can then be used for anything you want, including your monthly expenses or growth. You also receive the balance of the invoice value, less any fees or interest, once the customer has paid the invoice.

Requires no renegotiation

Because it is an ongoing agreement, you don’t have to renegotiate as often as other finance products, invoice discounting is often preferred. The facility is not like a loan and can continue to roll for as long you wish to pay the account fees.

Your agreement will change as your turnover grows. This is based on the terms you had at the beginning. Many businesses see their invoice finance agreement as an integral part of their financial plan and choose to grow with it.

Confidentiality

Discounting has the advantage of being completely confidential, especially when compared to other invoice finance products like invoice factoring.

Other products may reveal that you are using a finance company to send invoices to customers. However, everything is discounted between you and your factor. This is a great way to keep customers happy and maintain good relationships.

Invoice discounting is not long-term debt

Invoice discounting can be seen as less risky than other forms of borrowing since you don’t need to borrow large sums of money and have a clear source of revenue in mind. Invoice finance is a type of financing product that allows you to plan for your finances.

The money you lend goes directly towards a specific invoice.

As with any financial agreement, you should always seek the advice of an independent advisor before deciding if it is right for you.

 

With ielective invoice discounting, get cash for unpaid invoices

A company can finance its operations with selective invoice discounting. This is done by receiving money from unpaid invoices. For a fee, a finance provider will lend money to the company up to a certain percentage of the invoice’s value.

This allows the company to access cash from unpaid sales, which can be used to improve its working capital or invest in opportunities when cash flow is low or slow. The company is responsible for issuing the invoice to the customer and chasing up payment.

Confidential invoice discounting services

Companies with turnovers of at least £250,000 can avail of invoice discounting services from us. Invoice discounting is the perfect solution to issues like seasonal demand and late payments. These can put a strain on your cash flow and hinder your ability to grow your business.

The invoice discounting service will quickly make cash available so you can focus on your business, not just chase invoices. The money can be used faster to purchase assets or staff, which will help you to secure new contracts and expand your business.

Invoice Finance is a way to free cash from unpaid invoices and help SMEs grow in the UK. We have already helped over 700 SMEs.

How can I transfer my existing invoice discounting service provider to another?

We can help you switch to Loan Corp if your bill discounting provider is not available.

Contact us to arrange for a business development manager to visit you.

Once you have decided to work together, we will contact your existing invoice finance provider to arrange for the transfer of your invoices.

Within one to five business days, your funds will be available.

You can get up to £1,000 toward termination fees if you have an old provider.

You can also try our services for six months without any obligation.

If you leave your old provider for any reason, we will not charge you any exit fees.

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What is confidential invoice discounting?

Confidential Invoice Discounting (commonly referred to as “Invoice Discounting”) allows you to free up money from unpaid invoices to increase your cash flow.

Invoice discounting is a type of factoring that allows you to use your invoices for collateral.

This allows you to manage your credit control and keep our involvement private.

Is invoice discounting an option for a company that has experienced rapid growth?

Companies experiencing rapid growth may be able to benefit from Discounting services. A company needs cash to continue growth and expansion.

Companies experiencing rapid growth may find it difficult to pay for unexpected demand. This can lead to a loss of business.

Contact us here today to get started with invoice discounting.

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