Invoice Discounting

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Invoice Discounting

Updated: 5th May 2020

Invoice discounting is an invoice finance facility that allows business owners to leverage the value of their sales ledger. When you send an invoice to a customer, a proportion of the total amount becomes available from the lender to provide an invaluable source of working capital throughout the month.

You remain in control of the sales ledger, collecting payments as normal and sending out reminders. This allows you to maintain your own style of communication and standards of customer service, on which the success of your company relies.

Is invoice discounting right for your business?

With so many alternative finance options now available it can be difficult to know which one is the most appropriate, but invoice discounting could be a good option if:

  • Your credit control procedures are robust, and known to be effective
  • You have minimal bad debts
  • Your customers pay on time in the main
  • Customers have a minimum of 30 days in which to pay
  • You meet the minimum level of turnover required by the lender

Discounting services are generally more widely available to established businesses rather than start-ups which, by their nature, would not have reliable turnover and credit management processes.

Negotiating the best invoice discount terms with lenders

With so many companies offering lending based on the value of invoices, it is a good idea to obtain professional advice on which type of invoice discounting contract would be most suitable for your business.

Some companies are more flexible than others with their requirements. Lenders may limit the amount of cash they are prepared to advance, or charge higher fees if they perceive the industry in which you operate as high risk, and it is only by establishing your standing in the eyes of each lender that you can get a feel for where terms may be negotiable.

Lenders may reduce their fees after a certain number of invoices have been ‘sold,’ or offer credit insurance to mitigate the risk of non-payment by your customers, for example. But the financial/accounting side of discounting your invoices is just one area that you’ll need to think about.

Real Business Rescue can offer the professional guidance you need when considering invoice discounting. We are able to advise on whether this is the right type of finance for your business, and help you understand the benefits offered in more detail.

Neil Jeeves


0800 182 2358

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