Invoice Discounting
Businesses are looking for modern financing solutions, and invoice discounting is emerging as a leading solution. This solution allows businesses to finance their receivables without taking on additional debt.
What is Invoice Discounting?
Invoice discounting is the simplest form of debtor finance. Because of prolonged payment terms of up to 90 days, invoice discounting can help businesses struggling with cash flow. However, allowing customers to pay in 30 to 90 days can affect cash flow if your business doesn't have sufficient financial reserves.
With invoice discounting, you can finance invoices raised under credit terms to free up cash. It is a quick and efficient method of solving immediate cash flow problems by providing funds. You can use these funds to run the business and cover its running costs.
With invoice discounting, we advance a percentage of your receivables ledger and deposit the funds in your bank account. The financing line is adjusted regularly as your customers pay old invoices and as you raise new invoices.
How Does Invoice Discounting Work?
Invoice discounting involves three parties: the business, customer, lender or finance institution. Here's how it works:
- The business raises an invoice for goods or services provided to the customers
- The business submits the invoice to us for verification
- The lender pays a percentage of the invoice value upfront
- Once the customer pays the invoice. The balance is paid into the business’s bank account. We deduct our fee from the payments.
Benefits of Invoice Discounting
Invoice discounting offers numerous benefits for businesses as a financing method that traditional financing methods do not offer. Some of the benefits of using our invoice discounting service include the following:
Flexible Financing
With invoice discounting, businesses can bring forward cash flow from unpaid invoices to boost working capital rather than taking on additional debt that increases their overheads.
Simple to Apply
Traditional loans have significant bottlenecks and can take several weeks to complete and get approved. Invoice discounting is much easier to apply for, taking a few hours to get a response and approval for funding. Once approved, a facility is out in place, and businesses can use the service as often as they want without additional approval. Businesses can get funds deposited in their accounts a few hours after submitting their invoices.
Retain Control
You choose the invoices you want to finance through invoice discounting. You also continue to manage invoice collection and control your customer relations, allowing the business to retain firm control of its account receivables.
No Collateral
New businesses and businesses without fixed assets can benefit from invoice discounting because it doesn’t require any real estate or fixed assets as collateral. This makes invoice discounting an excellent choice for new businesses.
Flexibility of Use
The funds businesses receive from invoice discounting are not limited in their use. Businesses can choose to use the funds to make payroll, meet their ATO obligations, or expand their operations through the purchase of new equipment.
With Invoice Finance, your business can improve its cash flow and expansion aspirations by leveraging its current unpaid invoices instead of taking on new debt.