Also known as confidential invoice discounting, invoice discounting is a popular method for improving cash flow for businesses who have payments tied up in 30-120 day invoices. The clue is in the name– the process is confidential which means no disclosure to your customers that you are financing through a lender. You also retain control of your sales ledger and send out your own reminders for payment.
We are the UK’s largest invoice finance broker – this means we work with a network of specially selected invoice discounting providers to ensure we find the right match for your business. We will help you consider the advantages and disadvantages of invoice discounting:
The Advantages of Invoice Discounting
- No physical assets required: Invoice discounting, as with other invoice finance products, does not rely on you using any assets as security other than your invoices.
- Confidentiality:Even though your customers don’t pay you directly when their invoice comes due, they are paying into a trust account in your name managed by the lender.
- Speed up cash flow: With the advanced amount from your lender, you have immediate access to funds you can now use to cover your business costs.
- Extra bolt-ons available: As well as the standard support and relationship management, you can also opt for bad debt protection, payroll support, or even more specific guidance.
The Disadvantages of Invoice Discounting
The requirements for invoice discounting are different from other forms of lending. If not managed properly, this, and a few other issues, can lead to unwanted circumstances. Here are a few of the potential pitfalls associated with invoice discounting:
- Only commercial invoices: If you are owed payments from someone other than a business – for example, a member of the public for whom you’ve provided a service – then they are not eligible for discounting.
- Established credit collection process: You must have in place your own strong process for credit collection in-house. If not, you may require factoring instead.
- Chasing payments: Because the process is confidential, you’re still responsible for contacting your customers when payment is due which can use up some of your time.
Invoice discounting is one of our specialities when it comes to funding your business. If you want to get in touch with an expert, fill in this quote form and a consultant will be in touch with you shortly.