What is invoice discounting?

Invoice discounting, sometimes referred to as confidential invoice discounting, provides funding against a firm's invoice book. However, unlike in factoring arrangements, the credit management is left under control of the firm. The firm's customers, whether UK-based or international, are unaware that finance has been raised over the invoices.

This type of debtor finance is the most cost-effective solution for clients, particularly when they have an efficient credit management system already in place.

Unlike factoring, the invoice discounters do not have direct control over the invoices (their security) and prefer to provide their debtor finance facilities to businesses that are well-established. Specifically, companies should have a strong balance sheet, be profitable and as previously mentioned, have a solid credit management system in place.

Invoice discounting facilities are not available for businesses with sales of less than £250,000 per annum and net tangible worth of less than £30,000.

Typical invoice discounting costs are around 2.5% over base rate on borrowed funds, plus a service charge that is linked to gross revenues. This usually starts at 0.1% and has a minimum level of around £5000.

Make a no-obligation enquiry to find out how invoice discounting could help your business.