What is invoice discounting?

Invoice discounting is a type of funding that allows businesses to access cash that is tied up in unpaid invoices. When a business extends credit to a customer, they often have to wait 30, 60, or even 90 days for payment. This can create a cash flow crunch and make it difficult to cover day-to-day expenses or take advantage of new opportunities.

Invoice discounting can provide the cash you need to bridge that gap and keep your business moving forward.

The benefits of invoice discounting.

There are several benefits of invoice discounting, including:

1. Faster access to working capital

With invoice discounting, businesses can get their hands on much-needed cash within hours rather than waiting for customers to pay their invoices.

2. Improved cash flow

By selling receivables at a discount, businesses can free up cash that would otherwise be tied up in unpaid invoices. This can help businesses avoid late payment fees and other penalties and improve their overall cash flow.

3. No collateral required

Invoice discounting is a form of unsecured financing, which means that businesses do not have to put up any collateral in order to qualify. This makes it an ideal option for businesses that may not have the assets necessary to secure a loan.

4. Increased sales

By freeing up cash that would otherwise be tied up in unpaid invoices, businesses can invest in new inventory or expand their operations. This can lead to increased sales and profits.

5. Not a long-term debt

Invoice Discounting contracts typically run for 1 year with an option to continue at the end of the term. Other forms of funding involve a longer term debt that appears on the balance sheet.

6. No Personal Guarantees

In many cases, Invoice Discounting providers do not require the Directors of the company to provide personal guarantees, unlike other forms of finance like bank loans etc.

Invoice Discounting vs Traditional financing

There are a few key differences between invoice discounting and traditional financing. First, with invoice discounting, you don’t have to go through the time-consuming and often difficult process of applying for a loan. Instead, you simply sell your invoices to a third party at a discounted rate. This can save you a lot of time and hassle. Second, with traditional financing, you typically have to put up collateral in order to secure the loan. With invoice discounting, however, there is no need for collateral. This makes it a much less risky option for businesses. Finally, with traditional financing, you usually have to make regular payments on the loan at precise intervals regardless of whether or not your business has the cash flow on that particular date. With invoice discounting, you receive up to 90% of the value of your invoices upfront, less the cost of finance, so that means no payments to worry about. This makes it a much more flexible and affordable option for businesses.In short,

1. Invoice discounting is a much faster way to get access to working capital than traditional financing.
2. With invoice discounting, businesses can free up cash that would otherwise be tied up in unpaid invoices.
3. Invoice discounting can help businesses avoid late payment fees and other penalties.
4. Repayment terms for invoice discounting are much more flexible than traditional financing.
5. Invoice discounting does not require collateral or personal guarantees from the Directors, making it a much less risky option for businesses.
6. Invoice discounting allows you to utilise your revenues faster, meaning you can grow quicker as well as allow you to negotiate better terms with your own suppliers.
7. With invoice discounting, businesses can focus on growing their business rather than worrying about securing financing.
8. Invoice discounting is a much simpler process than traditional financing.
9. Invoice discounting provides businesses with a more flexible and affordable option for financing their operations.

For an in-depth comparison, head over to The difference between Traditional Bank Loans and Invoice Financing.

The types of businesses that can benefit from invoice discounting

There are a few different types of businesses that can benefit from invoice discounting, including:

1. Businesses with a lot of outstanding invoices and late payments: If your business has a lot of invoices that haven’t been paid yet, invoice discounting can be a great way to get the money you’re owed quickly. This can help you avoid cash flow problems and keep your business running smoothly.
2. Businesses that need to make a large purchase: If your business needs to make a large purchase but doesn’t have the cash on hand, invoice discounting can be a great way to get the money you need. This can help you make the purchase without going into debt or taking out a loan commitment..
3. Businesses that are struggling to make ends meet: If your business is having difficulty making ends meet, invoice discounting can help you free up cash that would otherwise be tied up in unpaid invoices. This can help you avoid late payment fees and other penalties and improve your overall cash flow.
4. Businesses that are expanding: If your business is expanding, invoice discounting can help you free up cash to invest in new inventory or equipment. This can help you grow your business and increase sales.
5. Businesses that need to make a one-time payment: If your business needs to make a one-time payment, such as for taxes or rent, invoice discounting can be a great way to get the money you need.

How to get started with invoice discounting

If you think that invoice discounting might be a good option for your business, there are a few things you need to do in order to get started. First, you’ll need to find a lender that offers invoice discounting services.Once you’ve found a lender, you’ll need to provide them with some basic information about your business, including financial statements and a list of your customers. The lender will then review your information and determine whether or not you qualify for invoice discounting. If you do, they will provide you with a contract that outlines the terms of the financing. Once you’ve signed the contract, the lender will advance you the funds you need, and you can begin selling your invoices at a discount. If you’re looking for a way to free up cash that is tied up in unpaid invoices, invoice discounting may be a good option for your business.With InvoiceFair, you can access these funds within 24 hours. Try our free calculator to see how much you can raise in 24 hours with our invoice discounting solution.

Why InvoiceFair for Invoice Discounting?

InvoiceFair has a better way to finance your business. We don’t require you to take on any additional debt or provide personal guarantees and we don’t apply debtor or geographic concentration limits like other providers do – allowing for much more funding to be released so you can grow your business faster!We’ll advance you up to 90% of your entire Debtor Book and as much as 40% of current Work in Progress within 24 hours.

Benefits of Invoice Discounting with InvoiceFair:

1. No Debtor concentration limits – Release more funds from your Debtor Book
2. No Geographic limitations – we don’t limit what debtors we will finance based on their geographical location
3. WIP Funded – Confidence to tender for contracts with claims and WIP funding
4. No PG’s – No personal guarantees are required
5. Speed – Funds within 24 hours
6. No Hidden Costs – No hidden costs or non-utilization fees
7. Maintaining Control – You decide how much of your Debtor Book or WIP you want to trade
8. Confidential – Our relationship is not disclosed to your debtors
9. No FX Risk – Multi-Currency funding
10. Simple – Intuitive, easy-to-use platform

Conclusion

Invoice discounting is an extremely helpful tool for businesses that need quick access to working capital. This can be a great way to improve cash flow and working capitalWhy not try our free calculator to see how much money you could raise by selling your invoices and access funds in 24 hours? We make the process easy and straightforward so you can focus on running your business. Contact us today to learn more about invoice discounting and how it can help with your business growth.