What is Invoice Discounting?
Invoice discounting is where a third party agrees to buy your unpaid invoices for a charge. This can be as a percentage of the invoice value or a set fee. Invoice financiers can be independent, or part of a bank or financial institution.
Why would I want it?
Running a successful business is hard enough without having to constantly worry about being paid. Invoice finance can eliminate, to a degree, this part of your business allowing you more time to focus on getting more orders or sales. It bridges the gap between the point at which you make a sale, and the time payment is received.
How does it work?
A finance provider releases a pre-arranged percentage of the value of your sales ledger, usually within 24 hours of you raising an invoice. As your customers pay their invoices, the money goes to the invoice financier. This reduces the amount you owe, which means you can then borrow more money on invoices from new sales up to the percentage you originally agreed. Credit insurance is also available as an option in case your customer defaults.
What are the benefits?
You get a large percentage of your money without having to wait for your client to pay you. This helps with cash-flow and because you are in complete control of your sales ledger your clients will not know that you are using this type of finance which can be a good thing.
What are the pitfalls?
You still have to do your own debtor chasing, however if you have a strong accounts department this might not be a problem.
Invoice Discounting PARTNERS
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