What is Invoice Discounting Plan and How it Can Help Your Business Grow?

 Invoice factoring and discounting are asset-based working capital solutions offered by lenders to help businesses with their cash flow issues. The lender essentially provides business owners with an amount of cash that is based on a certain percentage of their unpaid invoices. This way, they can get immediate access to funds while waiting for their customers to pay. Invoice factoring and discounting can help boost capital and prevent disruptions on operations due to lack of funding. They are some of the best alternatives to bank loans because the chances of getting approved are high and the funds are usually available just one or two days after the request. 

Generally, the invoice finance factoring and discounting process looks like this: 

Step 1: A business creates invoices for their customers after selling their goods or providing services.

Step 2: The invoices will be sent to the lender.

Step 3: The lender sends the money that is equivalent to a certain percentage of the face value of the invoices sent.  

How do lenders get paid for their services?  

Invoice finance factoring and invoice discounting are different in this regard. In factoring, a credit controller will collect the payment according to the full amount indicated in the invoices. The balance of the invoice minus the controller's service fee will be sent to the business. Meanwhile, in invoice discounting, the business owners will chase the invoices and collect the payments themselves, and then pay the lender back for their services.  

Why should your business consider invoice discounting? 

Private

Privacy is one of the major concerns of business owners when it comes to invoicing factoring. If you don't want to disclose to your customers about the lender that you are working with, choose confidential invoice discounting. 

Control

The invoice discounting company won't be in charge of your sales ledger. You will be able to deal with your customers directly and build or maintain relationships with them.  

Affordability

Because you won't be using a credit controller, you can save more with confidential invoice discounting.

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