Invoice Discounting is a funding-only type of invoice finance.

It allows you to raise funds against your unpaid customer invoices. The Invoice Discounting provider would advance you an agreed percentage of the total invoice value.

The key difference between this and Invoice Factoring is that there is no credit control. This means you will continue to chase your own invoice payments in.  

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Invoice discounting can be done confidentially

This is known as 'confidential invoice discounting', and you’ll continue to deal with customers yourself as normal, meaning your customers will not know you are using an invoice finance facility.

As with all Invoice Finance products, Invoice Discounting bridges the gap between completing works and getting paid. This product is suitable for businesses with a strong credit control process and a suitable accounts package. It allows you to simply free up cash to grow and attract new customers.

How it Works

As Invoice Discounting is a funding-only facility, it operates differently to invoice factoring. You will still receive two payments from the lender. The first payment will be the initial bulk payment against the total invoice value, which is known as the pre-payment percentage. The second payment is the remainder of the invoice, minus the agreed upon fee. This is known as the residual balance. Your customer would still pay the lender directly, but a trust account would be set up in your name, so your customer will simply think you’ve changed bank details. The basic steps of Invoice Discounting are:

  1. Firstly, you would send an invoice to your invoice discounting company. They would advise how much they could advance on the invoice.
  2. Once the agreed amount of funding is available, your invoice discounting company will verify the outstanding debt with your customer. Usually, this will be done confidentially.
  3. Once the invoice is verified, your invoice discounting company will advance the funds to you.
  4. You will continue to chase payment from your customer for the invoice. The facility itself can be done confidentially.
  5. Once payment has been made by your customer to the lenders bank account, you will receive the remaining balance of the invoice, minus the agreed upon fee.

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Benefits of using Invoice Discounting:

  • As it is a funding-only facility, you will continue to chase in your own invoices.
  • Can be done confidentially, so your customers will not know you are using the facility.
  • The funding line is built to facilitate business growth, making it flexible and unrestrictive as your business grows.
  • Usually less expensive than invoice factoring, as you do not have the credit control included.
  • Ideal for both immediate cash injections, as well as a steady stream of cash going forward.
  • This product is more suited to businesses who are well established, have an accounts package and a strong credit control process.

Free your potential today by releasing cash on outstanding invoices