Selective invoice discounting: How it works and how to get started

If you’re an SME looking for information on selective invoice discounting, you might have one or more of the following issues in mind:

• You only want to finance a few of your largest invoices to help grow your business. You might have a lot of smaller contracts alongside a few larger ones, and don’t want the extra admin that comes with financing all your invoices.
• You’re familiar with invoice discounting but you’ve heard about hidden fees. The fact that you might not know up front exactly what you’ll pay makes you reluctant to try it.
• You’re looking for funding that’s quick and easy to set up and manage. 
• You aren’t sure if invoice discounting is the right funding solution for your business needs –  but you do know you don’t want to commit to a longer-term solution like a business loan.

In this article, we’ll look at selective invoice discounting in detail, including:

• How selective invoice discounting works
• How much does selective invoice discounting cost?
• How to get started with Financefair
• Why choose Financefair for selective invoice discounting?
• How selective invoice financing closed a cash flow gap in a multi-million euro contract

If you already know you want to try selective invoice discounting with Financefair, reach out to us to get started. 

How selective invoice discounting works

Invoice discounting – also known as invoice financing – is a funding solution that’s widely available in Ireland. It allows you to use your sales ledger to get a cash advance on customer invoices. We’re the only invoice discounting provider in Ireland that can offer you a choice between:

• Full book invoice discounting: You raise your entire sales ledger. This is more operationally intensive but costs slightly less than selective. 
• Selective invoice discounting: You choose specific invoices to finance – you can raise your largest invoices and leave out smaller contracts. Selective invoice discounting might be ideal for you if a small proportion of your customers make up the largest portion of your revenue each month. In this situation, financing every invoice (including those that are for relatively small amounts) would be operationally intensive for a small business. 

Invoice discounting can also either be:

• Disclosed: Your customers will know you are using invoice financing. A common form of disclosed invoice financing is ‘invoice factoring’.  This is where the lender takes on an operational role in the business, taking over credit control processes: this means your customers will pay their invoices to the invoice factoring company, and take care of any late payments or unpaid finances.
• Undisclosed: Your customers won’t be aware you’re using invoice financing. All Financefair invoice discounting facilities are undisclosed. This is also known as confidential invoice financing. Selective invoice financing with Financefair is always undisclosed, offering complete discretion. 

With selective invoice financing, there’s no tie-in. Your facility is available for you to use when you need it, and you choose which invoices to finance and when to do it.

How much does selective invoice discounting cost? 

The cost of funding with Financefair typically ranges from 0.75% to 1.50% per 30 days, depending on the product type, term, credit quality, and several other factors. 

Selective invoice discounting typically costs slightly more than the full book option. When you apply for funding and get your offer from us, it will include the total cost. This comprises three fees: 

• The annual platform fee: A fixed fee that’s charged on the total facility provided.
• A transaction fee: This is a percentage of the receivable funded.
• Discount charge: This is payable on the amount of funding used in a 30-day period and is linked to your credit score. The discount is greater the higher your credit score is. 

Here are some examples of what an ID facility with Financefair might cost, comparing selective with full book:

Use the calculator on our selective invoice discounting page to get an idea of how much it would cost for you.

How to get started with Financefair

We can finance individual invoices from €30,000 and provide up to €50m in annual funding if your company meets our criteria: 

• You’re a limited company and have two or more directors
• You’ve been in business for three years or more
• Your minimum annual turnover is €3m
• You have an average debtor book of at least €500,000

Getting started with Financefair selective invoice discounting is easy:

1. Apply: To get started with us, you can:
   1. Get in touch with us directly to discuss your funding requirements. Call +35315252486, email busdev@financefair.com, or book an appointment with us, and we’ll tell you if we can offer funding to your company.
   2. Complete a funding application form, which just takes a few minutes.
2. Offer: You’ll get an indicative offer in one business day.
3. Onboard: The next step is to run the required KYC and AML identity checks and onboard you onto the platform, which the team will help with. 
4. Funding: When your facility is open, upload your invoices onto our platform. Once they’re verified, we’ll advance up to 90% of the value of the invoice to your bank account within 24 hours.

Why choose Financefair for selective invoice discounting?

Founded in 2015 by a team of accounting and finance professionals, Financefair (initially called InvoiceFair) provides flexible tailored working capital solutions that help ambitious businesses grow faster. 

This includes funding options like revenue based financing, line of credit, and both full book and selective invoice discounting – and we’re the only provider of selective invoice discounting in Ireland. 

So why should you choose Financefair to grow your business?

Save time on admin and get flexible, hassle-free funding

Many invoice discounting companies need you to upload information to your account daily at a particular time, plus your bank statements each week. This creates a lot of admin that can be a drain on resources. 

With Financefair, the technology in our platform means there’s no need to upload information manually – we can fund your account automatically. This saves you and your team time and energy that can be better spent growing the business.

Access different kinds of growth funding through our platform

As part of the application and onboarding process, we’ll speak with you to understand your business, immediate needs, and future growth plans. We’ll also use data analytics to get an accurate understanding of your circumstances and funding requirements. 

The support doesn’t end once your initial funding is approved and your facility is set up. Going forward, we’ll work together to review your funding regularly, using our industry knowledge and decades of financial services experience to make sure you have the best finance solution for your business needs. 

As well as selective invoice discounting, we also offer other business finance products – all of which are off balance sheet and require no personal guarantee. These include:

• Revenue based finance: Use up to 20% of your future annual recurring revenue for access to upfront capital. 
• Line of credit: Like an online overdraft that isn’t attached to a bank account, a line of credit lets you access up to €250,000 instant working capital when you need it.

You also have the option of starting with selective invoice discounting and moving to full book if it would work better for you. 

We know it can be tricky to get funding from banks if you have a subscription or recurring revenue model, as they often only want to fund businesses with blue-chip debtors. But as long as you meet our eligibility criteria, we can finance these different business models. 

How selective invoice financing closed a cash flow gap in a multi-million euro contract

Meritcom, a leading data and telecommunication services provider, has operated for over 20 years. 

The company won a multi-million euro contract with a social media company to provide sub-contracting services for a large-scale data centre project in Denmark. Meritcom was to provide highly skilled workers for services such as power and electrical works during the build phase of the data centre site expansion. 

As the project ramped up, the labour requirement increased, along with the working capital requirements. The repayments from the primary contractor were on a 30-day payment term cycle, but Meritcom paid their staff weekly, which created a cash flow gap.

Meritcom needed a cash flow strategy that would cover the initial set-up costs of the project before they received any payments from the primary contractor. We took our time to understand the business’s working capital needs and ultimately suggested selective invoice financing. 

This solution allowed Meritcom to leverage 70% of the purchase order in the initial set-up phase to assist with the capital costs at the start of the project and 90% of completed worksheets to provide working capital as the project moved through the design and build phases.

Find out more in our case study on Meritcom.

Decide what invoices to fund and when with Financefair selective invoice discounting

In this article, we’ve taken a deep dive into selective invoice discounting, looking at how it works and how you can get started with us at Financefair, the only finance provider of selective invoice discounting in Ireland. 

We’ve also seen how selective invoice discounting was the ideal solution to close a cash flow gap in a big contract, where there was the need for an initial outlay to get set up before any payments came in, plus weekly payments to workers going forward. 

If you could benefit from the option to finance some of your invoices as and when you need to, reach out to us today to get started.