Invoice Discounting: Get paid when you invoice
Fund growth and solve cashflow challenges – by getting paid for the work you do as you do itSpeak to one of our experts020 4525 5312
instant acccess to funds
- Funds advanced as you issue invoices
- 90% of invoice value immediately
- Funds in your bank with 24 hours
- Balance when client pays
- Improved cashflow
- Ideal for supporting growth
- Turnover of £100,000 or more
- Helps SMEs work with large corporations
- Reduce financial risk
- Ideal for B2B trade
- Non payment insurance
- No impact on other credit arrangements
Invoice Discounting can help your business expand, grow and solve cashflow challenges – by ensuring you always get paid for the work you do faster.
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It provides a working capital solution that lets your business get advances on the cash you are due from customers, without having to wait for those customers to pay.
So, rather than waiting 30 or 60 days for payment, or even longer with large corporate customers who may take months to pay, you get the funding as soon as the work is done.
It means you have the working capital you need to operate your business and invest in growth.
How it works
Invoice Discounting provides a cash advance using your invoices as the collateral - the security the lending company needs to advance money.
With Invoice Discounting, you raise an invoice as usual, send it to your customer and send a copy to your finance provider to authorise payment. They can release 75-90% of the value of the invoice immediately, depending on your arrangement.
When your customer pays you the outstanding invoice, you pay it into your account with the finance provider. Once the funds have cleared, they will send you the ‘balance owed’, less their fee.
- You provide the goods/services to your customer and invoice them
- You send the invoice details to the invoice finance provider
- The provider pays you an agreed percentage of the invoice value
- When your customer pays, the balance of the invoice is made available to you – less the provider’s fee
If your business already has sound credit management, and the staff and systems to ensure customer collections, Invoice Discounting could be the simple way to speed up your cashflow.
The finance company earns money both from the interest rate it charges on the loan and from a monthly fee to maintain the arrangement.
Reducing risk to your business
Invoice Discounting can reduce financial risk to your business. Because all cash advanced is secured on invoices you have already issued, it avoids the danger that you will fall behind with loan repayments, which is always a possibility with traditional commercial finance.
With some providers, there may also be an option to combine Invoice Discounting with Bad Debt Protection. It can minimise the risk that failing customers could damage your business.
Invoice Discounting vs Invoice Factoring
Invoice Discounting differs from Invoice Factoring because the collection of payment from your customers remains your obligation. With Invoice Factoring, the provider’s own credit control team will contact your customers. In the case of Invoice Discounting, you are still in full control, and your customers will not be aware that you are using the service.
If your business has issues with credit control and collecting payments, then Invoice Factoring may be a better choice in that the Factoring provider, with specially trained staff, will be better equipped and experienced in managing late payments.
What are the advantages?
Invoice Discounting turns debtors into cash faster and generates the maximum working capital from your sales ledger balance. The advantages to your business include:
- Improved cash flow - you no longer have to wait up to 90 days or more to get paid
- Get 90% of invoice value as soon as you bill your customers
- Cleared funds can be in your account the day after you invoice
- You retain control over your credit control – your customers will not know you are using the facility
- The level of funding you can call on will grow in relation to your level of outstanding invoices – making it ideal for funding growth
- Ideal for high-profit businesses that are growing at a rapid rate, and need the cash flow to fund additional growth
- Injects capital into your business, without having to deal with banks or sacrifice equity.
Is it right for your business?
Invoice Discounting has become a major source of Working Capital Finance. There are several reasons for this. One is the restriction of bank financing. As Invoice Discounting is secured by the collateral of the invoice due from your customer, it is a cash advance rather than a loan, and so has little or no impact on your other credit arrangements. Another key reason for its popularity is the fact that is very cost-effective.
Invoice Discounting works best for companies with relatively high profit margins, since they can readily absorb the relatively high interest charges. It can, therefore, be ideal if you have an annual turnover above £500,000 and an established credit control system in place, as it avoids the need to change your established credit control procedures.
Unlike bank overdrafts and traditional forms of lending, Invoice Discounting is a flexible facility that grows with your business. It enables you to quickly inject capital, without having to deal with banks or sacrifice equity. Invoice Discounting is a quick way to free up money.
Whole Turnover or Selective Invoice Discounting?
Invoice Discounting facilities are traditionally based on your whole turnover, meaning that all your invoices will be used to provide the maximum cash advance. However, you may not want to use your entire sales ledger - which may not be the most cost-effective solution, especially if you have some customers who pay quickly.
Selective Invoice Discounting - Single Invoice Finance - allows you to use individual invoices as the basis for a discounting arrangement. This can reduce the cost and increase the flexibility of the arrangement. It can be particularly appropriate for small businesses which have seasonal fluctuations in cash flow and so may have a varying need for finance.
Financial solutions from Rangewell
The rates and terms offered by Invoice Discounting providers vary, and it is important to have expert help to get the most competitive provider for your business type, your sector and your turnover.
At Rangewell, we can use our finance expertise to support your business – and ensure that you have the financial solutions you need. We can help source Invoice Finance providers who can provide solutions tailored to your sector, whether you're looking at Supply Chain Finance to Invoice Discounting and Whole Ledger Finance - reducing your costs and helping you have more funds to operate and grow your business.
REAL EXAMPLES OF WHAT WE CAN DO
Help arrange funding for a bathroom fitting company supplying a major developer
Find an arrangement for a plastics company providing an IT manufacturer
Find finance to let a shoe company fund expansion without borrowing
Source funding to support a furniture manufacturer maintain a cash reserve despite having a seasonal business
Arrange funding for a paper manufacturer providing a niche product for the fine art market
Discover our range of finances
Every type of finance for every type of business
Our goal is very simple - to help businesses find the right type of finance as quickly, transparently and painlessly as possible.
Helping you build your profits
Accelerate your cash flowInvoice discounting essentially accelerates cashflow from customers so that, instead of waiting for customers to pay within their normal credit terms, you receive cash almost as soon as you issue the invoice.
A confidential serviceYou control your accounts receivable, so you remain responsible for extending credit to customers, invoicing them, and collecting. There is no need to notify customers of the discounting arrangement.
A solution for growthInvoice discounting can be a solution for high-profit businesses that are growing at a rapid rate, and need the cashflow to fund continued growth.
ChoiceYou can choose whole of ledger invoice discounting, or selective invoice discounting, depending on your needs and relationships with your customers.
FlexibleInvoice discounting is flexible. The facility can grow or reduce in relation to your level of outstanding invoices.
FastIn the current economic climate, when arranging some forms of business lending can be difficult or time consuming, invoice discounting can be one of the fasted forms of borrowing for SMEs and mid-size corporates.
Download Rangewell’s free and detailed guide to Invoice Finance , including Invoice Factoring and Invoice Discounting
What is Invoice Finance?
How do I release money from unpaid invoices?
What is the difference between Invoice Factoring and Invoice Discounting?
Do you need to be the credit controller with Invoice Discounting?
What is Confidential Invoice Discounting?
How do I apply for an Invoice Discount facility?
Do a business' credit terms affect an Invoice Discounting facility?
Can Invoice Discounting help with cash flow?
Can I use Invoice Discounting to boost working capital?
What standard terms and conditions can I expect with Invoice Discounting?
Does the value of your invoices matter when applying for Invoice Discounting?
Can an Invoice Discounting lender provide other financial services such as bad debt protection and credit management?
Why can you only release 90% of the value of the invoice?
Who is responsible for credit control and collecting payments with Invoice Discounting
Can the lender provide a credit management service?
Do I need to choose a lender who is registered with the financial conduct authority?
What credit terms can I expect with this form of business finance?
Is it usual to manage your own sales ledger on outstanding invoices?
What happens with the remaining balance or slow payments?
Is Invoice Finance a type of short-term funding?