Invoice Discounting

What is Invoice Discounting?

Invoice discounting releases funding against the value of invoices to bridge the cash flow gap arising from trading on credit terms.

The invoice discounting provider advances up to 90% of the invoice’s value within just 24 hours of its issue, enabling your business to trade in confidence and meet its day-to-day commitments.

Different types of invoice finance offer different benefits. Invoice discounting facilities are flexible and, while typically provided on a confidential basis, they can additionally incorporate bad debt protection if required.

To see how much your business could release through invoice discounting, get an instant quote below:

How does invoice discounting work?

Your business raises an invoice
Invoice discounting company advances up to 90% of its value within 24 hours
You collect payment from your customer
Remainder of invoice value is forwarded to you, less the invoice discounting company’s fee

Diagram: How invoice discounting works

Invoice discounting advantages and disadvantages

When trying to decide on the right funding facility for your business, reviewing the pros and cons of each option is a great place to start. Here are some of the key advantages and disadvantages of invoice discounting:

Invoice discounting facilities bridge the cash flow gap between paying suppliers and getting paid, keeping funding free to keep your business running
You keep your credit control function in-house to build on customer relationships
Confidentiality means the invoice discounting company’s involvement is not visible to your customers
The funding available grows in line with the business
Credit protection can be incorporated to safeguard cash flow against the threat of debtor insolvency and protracted default
Early access to cash can help you secure early settlement discounts with suppliers
The facility can be used to leverage additional funding
The responsibility for collecting payment from your customers stays with your business. This can be difficult for smaller businesses with limited resources, who might benefit from Invoice Factoring instead
Invoice discounting is best suited to businesses that turn over at least £1 million, so may not be suitable for small businesses.

See how invoice discounting helped our client to reduce cash flow pressure

Your invoice discounting options

When it comes to getting the most benefit from invoice discounting, there are a few different options to suit your situation:

Confidential Invoice Discounting
Disclosed Invoice Discounting
Non-Recourse Invoice Discounting
Cross Border Invoice Discounting

Confidential Invoice Discounting

Confidential invoice discounting allows your business to access 90% of the value of invoices within 24 hours, but ensures your customers won’t be aware that you have this funding mechanism in place.

This is a great way for your business to boost cash flow without interfering with your customer relationships, allowing you to continue managing them however you choose.

Disclosed Invoice Discounting

Disclosed invoice discounting works in much the same way as a confidential facility, however the funder’s involvement is disclosed to clients.

While invoices will refer to the fact they have been assigned to an invoice finance provider, customers pay the invoice finance provider directly.

Non-Recourse Invoice Discounting

Non-recourse invoice discounting facilities additionally incorporate bad debt protection to safeguard your cash flow.

The benefit is that your business is protected from non or late payment through both debtor insolvency or protracted default. It also avoids the need to have credit insurance as a separate facility, as the invoice discounting company will manage the policy.

Cross Border Invoice Discounting

For businesses which supply customers overseas, cash flow can quickly become tied up due to goods often being in transit for long periods.

Cross border invoice discounting facilities give businesses the opportunity to release cash against the value of these invoices within just 24 hours of their issue, helping to ease the cash flow burden on the business and provide the means to continue investing in growth.

Like with other invoice discounting facilities, up to 90% of the invoice value is typically released, with the remainder made available once the customer pays.

The benefits of cross border invoice discounting include working with specialist lenders who understand language and cultural differences, receiving cash in your preferred currency and a reduction in time and money spent accessing international payments thanks to overseas bank accounts.

Which invoice discounting facility is right for my business?

With so many options and invoice discounting companies to choose between, the search for the right funding can be a time-consuming process, and it’s not always obvious which combination represents the best fit for your business.

As an award-winning invoice discounting broker, our funding experts work with businesses at every stage of their funding search to save them time and money.

We are able to introduce you to invoice discounting facilities and providers with a proven track record of supporting businesses in your sector, and provide access to key decision makers to speed the process up.

We consider all your business’s objectives and requirements, then introduce the facility that can offer you what you’re looking for in terms of funding, level of service, culture and cost.

To explore your options with one of our funding consultants, call us on 0800 9774833 or get an instant quote today.