Invoice Discounting FAQ's

Invoice discounting is an extremely effective method of improving a firm's cash flow position by converting its outstanding customer invoices into cash. With an initial advance level of up to 90% (typical 75-85%), it provides an immediate cash injection into the business and then an ongoing facility which grows automatically in direct relation to any sales increase.

Invoice discounting providers can also provide finance against stock, plant and machinery, and also property though Asset Based Lending.

How does Invoice Discounting work?

With Invoice Discounting, you raise your customer invoices just as usual and send them to your customer. You then present the invoice finance provider with a copy of the invoice you wish to discount against and this is used to advance you payment secured upon that invoice.

Subject to individual circumstances up to 90% of the invoice value can be advanced and other than the invoice, no other security is required.

Invoice Discounting differs to Factoring in one very distinct way. With discounting the collection of payment for your outstanding invoices remains firmly with you.

What Types of Invoice Discounting are there?

There are typically 4 invoice discounting facilities to choose from and Factoring Finance will assist you in finding the best facility for your needs:

Disclosed Invoice Discounting (DID) / Confidential Invoice Discounting (CID) / Single Invoice Discounting and Selective Invoice Discounting

How does Disclosed Invoice Discounting (DID) work?

This is a typically known as a half way house between factoring and confidential invoice discounting and is for those companies whose balance sheets are not quite strong enough for CID.

Unlike Factoring, the company still manages its own sales ledger and credit control functions but as with factoring, its outstanding sales invoices include an assignment notice requesting the customer to pay the lender direct. The lender then takes its fee and the advanced amount from that payment and forwards the balance.

For many firms this type of facility can quickly develop into a confidential arrangement as the benefits of the improved cash flow position begin to take effect.

How does Confidential Invoice Discounting (CID) work?

Confidential Invoice Discounting is generally only available to established businesses that are well run, have a history of profitable trading and a strong balance sheet. Typically, firms wanting to use Confidential Invoice Discounting should be turning over £300,000 per annum plus, have robust sales ledger/credit control functions and have a net worth of at least £30k.

The main difference between Confidential Invoice Discounting (CID) and factoring is that the service and the facility is entirely confidential and your customers are unaware of the facility

How does Single / Selective Invoice Discounting work?

Single Invoice Discounting and Selective Invoice Discounting are ideal invoice discounting facilities for those companies dealing with large single orders or whose normal trade patterns have seasonal trading conditions. Large single order companies are typically contractors with one or only couple of customers and season businesses would be the likes of winter sports clothing manufactures and the like.

The facility works by you simply nominating which invoice or invoices you want to discount or the individual debtor(s) you want to discount against.

This type of invoice discounting facility is not very common and provided by just a  few invoice discounting providers but Factoring Finance Ltd has access to an independent, UK wide broker network and will assist in finding the best facility for your business needs.

Alternatively, you can use can call/email us directly with your query through the contact us section.

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