Invoice discounting enhances your cash flow by providing immediate access to funds tied up in outstanding invoices.
Invoice discounting, like invoice factoring, is a financial solution that helps businesses improve their cash flow.
In essence, it allows businesses to unlock the money tied up in their invoices, enabling them to have quicker access to the cash.
What sets invoice discounting apart is it allows businesses to retain control over customer relationships and payment collections. This confidentiality stems from the fact that it is a discreet financial arrangement.
As a result, your customers will be unaware of this facility. This means your business maintains its usual interactions with customers while still benefitting from accelerated cash flow.
Invoice discounting is a way to get money from your invoices faster, whilst retaining confidentiality and control of your collection process.
Here’s how it works:
1.
Do your work
2.
Send an invoice
3.
notify your Funder
4.
Get paid quickly
Your funder then deposits up to 90% of the invoice value into your bank account, typically within a few days
5.
Confidential Account
6.
Fees are deducted
Invoice discounting is a versatile financial solution for B2B (business-to-business) companies in the UK. This facility particularly caters to businesses that issue invoices with extended payment terms, often ranging from 30 to 90 days or more.
To qualify for this service, most invoice discounting providers typically require businesses to have a minimum of 12 months of trading history and a net turnover exceeding £250,000.
We assist businesses from various industries in finding the ideal discounting partner to meet their unique needs.
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Invoice discounting offers several benefits to businesses. Helping them manage their cash flow and improve financial stability.
Here are some key advantages:
Improved Cash Flow
It helps to bridge the gap between issuing an invoice and receiving payment. Ensuring a steadier cash flow for day-to-day operations.
Invoice discounting is not a loan, so it doesn’t add debt to your balance sheet. It’s a way to leverage your existing assets (invoices) for cash.
Your customers are unaware of the financing agreement. This allows you to maintain control over customer relationships and collections.
Having access to cash when you need it allows you to take advantage of growth opportunities and meet customer needs.
The cost of invoice discounting can vary depending on the provider, your business terms, and the volume of invoices you’re looking to fund.
Some common cost components include:
For an educated estimate of how much invoice discounting might cost you, check out our invoice finance cost calculator.
Invoice discounting and factoring are similar but have key differences. Invoice discounting is confidential, meaning your customers are unaware of the arrangement, and you maintain control over collections. Factoring involves the sale of invoices to a third party who takes over collection responsibilities.
Check out our blog, what is the difference between Invoice Factoring and Invoice Discounting, for more information
Typically, businesses can access up to 90% of the invoice value, depending on the provider.
Funds are often available within 24-48 hours of invoicing approval by the discounting provider, making it a swift source of cash.
If your customer fails to pay the invoice, the responsibility for collecting the payment may vary depending on your agreement with the discounting provider.
Typically, invoice discounting is confidential, meaning your customers are unaware of the financial arrangement. You maintain control over customer relationships and payment collections.
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Prioritising People
When choosing a factoring company, businesses must decide between independent factoring companies and traditional bank factors. In this blog, we will discuss four reasons why independent factoring companies are the better choice for businesses.
Invoice finance offers a wealth of benefits for businesses, yet it is often faced with scrutiny, due to the misconceptions that cast doubts on its
Both types of facility enable a business to release cash early from funds tied up in both existing and ongoing sales ledger balances. There are,
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Smart Business Finance is an independent business finance broker based in Chesterfield.
