What is an invoice discounting facility?
For any business owner, the sight of a pile of unpaid invoices can be a daunting, stressful prospect. When will you receive remittance?
Is a lack of cash flow strangling your business? If this sounds familiar, you may be glad to hear that there’s actually a way to release funds from those unpaid in-voices and it can be a great way to finance your business if you need extra capital.
There are all sorts of solutions available for businesses seeking finance, but today we’re going to ask: what is an invoice discounting facility and how can it help realise a company’s ambitions whilst protecting customer relations?
How does invoice discounting work?
Invoice discounting is a relatively simple process; you simply raise in-voices as usual, present a copy of the invoice to the lender and they will give you up to 90% of the cash you are owed straight away. The customer is never contacted and, when they pay, the remaining percentage will be re-turned to you, less an agreed fee for the lender.
Will it work for my business?
Now we know obtaining an invoice discounting facility is a relatively simple task, how suitable is it for your business? There are some caveats to take note of, as you may expect. The key thing to bear in mind is that this particular financing scheme isn’t designed for starter or micro businesses as most invoice discounting providers suggest a minimum turnover of between £100,000 to £250,000. You should also be able to demonstrate a profitable trading history and strong credit control.
What are the key benefits of an invoice discounting facility?
We think there are five key benefits of using the latent value in unpaid invoices to finance your business:
- It is entirely confidential. Invoice discounting doesn’t affect your customers in any way and there is no requirement to inform them of the process.
- As soon as you’ve raised the invoice, access to funds is near instantaneous.
- You can maintain control of your invoicing process.
- Invoice discounting will have a positive effect on your month end accounting activities. This is due to it reducing the amount of time you’ll need to spend reconciling invoices.
- Your cash flow will benefit as you’ll no longer be sitting on unpaid in-voices and you’ll be able to release funds even before your payment terms expire.
The bottom line
What is invoice discounting? It is possibly one of the quickest and most convenient ways for businesses to raise capital. If your business has been established for a while and you’ve got a positive trading history, there’s little to argue against invoice discounting. The fees involved are generally easily digestible and it offers a two pronged attack. This is due to it enabling you to raise money for investment while reducing the strain caused by unpaid invoices.
Some of the partners we work with...
From a funders perspective, I find that the team at WF Financial Solutions, really take the time to understand the customers’ needs and wants and with their vast experience are able to match them with the correct funders. This really helps the funders to build a fast and trustworthy relationship to ensure any facilities are provided in a timely manner.
- Wayne Spratt, Business Development Manager, Bibby Factors Yorkshire
Why choose us?
WF Financial Solutions is an independent broker of invoice, asset and trade financing solutions with links to lenders of all sizes and specialties. WF Financial Solutions has helped many clients through a range of lenders and their varying services and we are proud to offer advisory and introductory services to finance providers that suit your needs.
Get expert help & advice with...
We specialise in sourcing the best factoring facilities for start-up’s, SME’s and big businesses.
One man band to large corporation, we work hard to ensure you get the deal that works for you.
Trading internationally, buying an asset or looking to refinance, we’ll help you get the best deal.
Sector Specific Funding
Different sectors have different needs and we pride ourselves on working hard to understand your situation.
We work closely with banks to secure the right banking facility or commercial mortgage for your business.