If you are looking to implement plans to increase the number and size of your clients, invoice discounting could help you cover the associated costs. Invoice Discounting allows you immediate access to the cash tied up in your unpaid invoices so you no longer have to wait 30-120 days until you receive payments from your clients. Best of all, your customers never need to know about the arrangement as the facility can remain entirely confidential.
Similar to its close cousin, invoice factoring, invoice discounting advances payments from your outstanding sales ledger. This frees up your cash flow so you can reinvest your income back into the business where it needs to be, such as paying staff or covering the costs of materials and transportation. The basic steps of invoice discounting are broken down below.
Step 1 (Invoice) – You raise an invoice with your customer to determine how much is due to be paid to your business and when it is due.
Step 2 (Advance) – You receive up to 100% of the value of that invoice as a cash sum, usually within 24 hours of sending a copy of the invoice to your lender.
Step 3 (Cash) – You now have the cash you need to cover the cost of additional jobs, wages, materials and any other cash consuming aspects of your business.
Step 4 (Repayment) – Once the invoice falls due, the lender receives the payment from your customer. Of course, your customer won’t need to know about that. You will then be forwarded the remaining value of the invoice you were not initially provided with, minus prearranged fees.
Invoice discounting is ideal for companies with £100,000 (plus VAT) turnover and does vary in fees and service rates. However, a quick visit to our interactive invoice finance calculator below will provide rough estimates on the sort of costing involved.
From here, hit the quote button to speak to a consultant and find out which UK lenders out of the 30+ available are right for your individual business needs and requirements. Our services are entirely free of charge.
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