The benefits of Invoice Discounting?
Invoice Discounting is usually provided as a confidential facility, more commonly known within the Commercial Finance industry as Confidential Invoice Discounting. It allows you to be in full control of your sales ledger at the same time as providing flexible funding which grows simultaneously with your business needs. Other benefits of invoice discounting include:
- The certainty of immediate and growing working capital– The more sales invoices you generate, the more working capital is made available to you. Meaning that your available finance grows with your business.
- Freedom– to obtain early payment discounts and more favourable terms from your suppliers.
- Preserve your credit rating – The instant availability of cash that Invoice Discounting provides will ensure you have sufficient funds to make prompt payments to your suppliers. This should boost your credit rating and help to preserve it.
- Unique sales advantage – As your strong liquidity position will allow you to offer extended credit to your customers and re-inforce your relationships.
- Discretion– The confidential nature of an Invoice Discounting facility means that generally your customers will not be aware of the fact that you are financing your debtors.
- Control– Retain complete control over sales ledger management and collections.
- Flexibility– No need to constantly renegotiate your facility.
- Security – Many Invoice Discounting providers will offer an insurance policy bad debts, meaning your business will be protected should the customer default on repayments to you.
The benefits of Factoring?
- Funding increases as your business expands– The more invoices you raise to your customers, the more cash becomes available to you. This means you should always be in a strong liquidity position, no matter how rapidly your business is expanding.
- Freedom– Your suppliers may allow you a discounted price in exchange for earlier repayment, giving you the opportunity to increase the profit margins on your sales.
- Boost your credit rating – Invoice Factoring will provide you with cash within 24 hours of raising an invoice, meaning your businesses credit rating can be boosted and preserved by paying its debts promptly.
- Free up your resources – Handing the administrative responsibility of managing your sales ledger over to your lender frees up your workforce for more important matters.
- Improve customer relations – Your business may find itself in a position where it can afford to offer extended credit terms to your customers, which will improve your relationship and may give you a sales advantage over competitors.
- Convenience– Funding is given automatically as you issue your invoices with no need to constantly renegotiate your facility – unlike an overdraft.
- Security – By taking out ‘none-recourse’ Invoice Factoring you are protected should your customer default on the repayment to your lender. The lender will absorb the debt, rather than your business.