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What is Invoice Discounting?

Published on 22nd November 2017 - Last update on 13th April 2020

Does your business have invoices that haven’t been paid? Or, do you need cash sooner than expected? Invoice Discounting is a way of unlocking cash tied up in any unpaid invoice you have issued, worth in excess of £5,000, allowing you to support and develop your business. So, if your business trades on credit with other businesses and you’re currently awaiting payment, Invoice Discounting could provide the solution. But before you rush in, you need to understand what Invoice Discounting is and how it works. To help you make an informed decision, let’s take a look and discuss how this product can be applied to your business.

How does Invoice Discounting work?

Like Invoice Factoring, Discounting is a method of finance that’s secured against your business’ receivables. Should a potential lender offer you an Invoice Discounting agreement, you can borrow up to 90% of any outstanding invoice in excess of £5,000. Once acquired, the funds can be used to support your finances or provide cash for any area of your business. Plus, unless an agreed period has passed, you only begin repaying the lender when your client begins paying. As such, Discounting is often considered a flexible form of borrowing.

If you’ve got unpaid invoices or need cash before a client’s invoice is due, why not apply for Invoice Finance, or find out more about how your business could benefit today!

How is Invoice Discounting repaid?

With an Invoice Discounting agreement, the customer or client associated with the invoice pays the outstanding funds directly into a lender-controlled facility. Nonetheless, you can choose to be the credit controller and ensure payments are forthcoming or, if available and for a fee, you could instead make use of your provider’s ledger service. When your customer or client has fully paid the sum stated on the invoice, your finance provider will calculate and deduct both the interest and any fees incurred. After this has taken place, a lump sum (or balance) is released to your business.

Because repayments are coming from your customer and being deducted by the lender, your cash flow and capital is left unscathed by the product. However, if the customer fails to repay the invoice after an agreed period has passed, the lender will demand payment from your business instead.

How to source Invoice Finance for your business?

Waiting for payments from customers and clients can be stressful. They may be overdue in paying or you may need the funds sooner than you first thought, which is why many SME owners choose to support their businesses with Invoice Finance. Whether you’re operating in veterinary, manufacturing or even in IT, you can apply for an Invoice Finance solution to support your finances or even stimulate growth. However, sourcing a product that’s right for you from a lender you can rely on can be tricky, especially on your own. After all, how can you be sure you’re applying for the most appropriate funding option that comes with the most affordable interest rate?  

If you’ve got unpaid invoices and need finances quickly, Rangewell can source the most appropriate and affordable product for your business from a reputable lender. Apply now or contact us today at 02036374150 or [email protected] and let us answer your questions about Invoice Finance.


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David Harrison

David Harrison

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