Ever heard the term ‘Confidential Invoice Discounting’ and not know what it meant? Or perhaps you’ve heard of such a facility, but don’t know what it entails? Read on or call us now for a free, no-obligation chat about how it may work for your business – click here to request a callback.
What is it?
A Confidential Invoice Discounting Facility is a form of invoice finance that can boost a company’s cash flow by releasing funds from unpaid invoices for immediate use. The facility is confidential (as indicated in its name), meaning that debtors are not informed that such an arrangement is in place. It is a quick funding solution for businesses that invoice other businesses in arrears.
Who does it involve?
The parties involved in a Confidential Invoice Discounting facility are the business that is being funded and the invoice finance provider. The clients whom invoices are issued to are known as debtors.
How does it work?
The business and the invoice finance provider agree on a Confidential Invoice Discounting advance rate (this can be up to 100% of the value of the invoice). When the business raises an invoice to a debtor, it also sends a sales day book listing or uploads invoices to the invoice finance provider, who will forward the cash advance to the business, usually within 24 hours. As the facility is confidential, the business conducts its own credit management and collects payment from the debtor. The debtor deposits the payment into a trust account set up by the invoice finance provider, who is responsible for monitoring and managing the funds. Although the invoice finance provider owns the account, it is in the name of the company, so as to keep confidentiality with clients. Once the debtor has paid up, the invoice finance provider releases the outstanding funds from the invoice to the business (if the advance rate was less than 100%).
Why obtain a facility?
If you’re running a B2B company that invoices in arrears, receiving funds in advance of payment can help your business cover costs, helping your business keep its operations running. Depending on your business’s aims and financial circumstances, this advance cash flow injection could also be used to facilitate expansion and growth.
Businesses are at the mercy of their debtors’ payment schedules, and could end up waiting 30, 60, 90 or even 120 days for payment. A Confidential Invoice Discounting facility will ensure that the business is paid for products or services supplied in advance. This can be within 24 hours of the business issuing an invoice.
A Confidential Invoice Discounting facility suits businesses that have the resources to retain credit control, as they are in charge of their own sales ledger.
As a Confidential Invoice Discounting facility is funded against a business’s sales ledger, the funding received by the business grows alongside its sales volume.
Where can you find the best deal?
There are many different factors to consider when selecting an invoice finance provider. Touch Financial are experts at finding a facility which best suits your needs, whether price orientated, service focused, or a bit of both. We are work with over 35 lenders throughout in the UK and often secure favourable rates you may not be able to get by going direct.