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What is invoice discounting?

Invoice discounting is a form of cash flow finance that provides fast access to working capital.

An invoice discounting contract:

• Prepays up to 90% of the value of your invoices
• Offers bad debt protection

How does invoice discounting work?

The commercial finance company purchases your business sales ledger.

• When you raise new invoices, you send them to your customers in the normal way.

• You will advise the Invoice Discounting company (usually electronically), the total value of invoices raised. The invoice discounting company finances invoices at the pre agreed percentage against the value of those invoices immediately.

• You maintain control over your Credit Control function. Customer payments will continue to be sent to you.

• Once you have received payment from your customer, you will repay any money owed, plus any fees.

Benefits of Invoice Discounting to your business

• As finance is linked to sales, your company is in control of its financial position, allowing you to plan for growth.
• Immediate access to working capital allows a business to:
• Pay suppliers early and thus have more bargaining power
• Purchase new stock to finance future sales
Take advantage of bulk purchases through economies of scale
• Invoice discounting comes with the option of bad debt protection
• Invoice finance is fast becoming the preferred option for business finance. Bank overdrafts require regular renegotiation. If a lender finances invoices, then finance grows in line with your business

Is invoice discounting right of my business?

• You are a UK business selling products and services to other businesses in the UK or abroad.

• You have an annual turnover in excess of £250,000

How much does Invoice Discounting cost? 

Like all Invoice Finance facilities there are generally two costs involved.

• Service Fee: This covers the cost of administering the facility. It is generally in the region of 0.1% to 1% of your company’s sales.
• Discount Fee: This is the cost of borrowing from the Invoice Finance Company. It is quoted as a rate over Bank Base rate or one of the LIBOR (London Interbank Offer rates) rates. It can vary between 1.5% and 3%.

Get the most appropriate finance for your business.

Save time and money by letting us find the best and most cost effective business finance package for your organisation.

The Business Bureau has vast experience in invoice discounting.

Contact us now for a invoice discounting quotation. We would be delighted to discuss your individual business requirements further.