Invoice discounting offers greater financial headroom and, in turn, greater financial flexibility to help meet the costs of developing your company.
It also goes some way towards ensuring that you maintain a healthy cash flow.
In a nutshell, invoice discounting enables you to release funds against unpaid sales invoices, so that you can draw down up to 90% of the invoice value (more in certain circumstances) electronically within 24 hours of the invoice being raised.
The outstanding 10%, minus an agreed service fee, is released when the client settles the invoice.
In addition, a good invoice discounting company will help to support your credit control function as well as providing a credit vetting facility so that you can make informed choices about taking on a new customer or extending credit to an existing one.
Businesses are becoming increasingly wise to the many financial alternatives that exist in the marketplace, and it is little wonder that invoice discounting is now widely viewed as an alternative to an overdraft.
As well as removing the hassle of chasing debt, it brings in cash to the company sooner than waiting for standard credit terms, better equipping you to meet the peaks and troughs that come with running any business.
However, this is just one aspect of what invoice discounting can do for your business. Its inherent flexibility, in so far as it enables working capital to grow in line with sales (it is normally the reverse), means it is becoming much more of a feature of other areas of business.
For instance, it is now estimated that up to 40% of all management buy-outs are being completed with invoice discounting as a part of the overall funding package.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
