Invoice discounting is a type of invoice financing which helps to support company’s growth.  It is an asset-based working capital solution that allows business to drawdown funds against outstanding invoices rather than waiting to be paid.  Businesses can then use these funds to support company’s growth.  The facility can be both disclosed and confidential discounting, which explains further below.

Invoice discounting is a very attractive financing instrument during the company’s growth phase as it would require additional working capital injection to support the growth.  The credit limit usually grows with the company, giving the company the cash flow they required.

At the same time, invoice discounting is also very desirable during the credit crunch period as financier will be able to use invoices as collaterals, rather than offering an unsecured loan.

 

How Invoice Discounting Works

 

  1. Business delivers goods or services to the customer and raise an invoice.
  2. Business submits the raised invoice, together with supporting document to the financier.
  3. Funds are then made available against the submitted invoice within 2-3 days. Usually financier will advance between 70%-90% of the invoice face value.  A small percentage of fee will be charged against the invoice and may be taken upon the initial advance or settlement.
  4. Once the customer pays, the remaining balance will be returned to the business.

 

Different Type of Invoice Financing

 

Disclosed vs Confidential Discounting Facility

 

Disclosed Discounting facility

For a disclosed facility, all parties are aware and acknowledge the facility formally.  This means that the customers will be informed and will settle their invoices to the financier directly.  Business can leverage the customer’s credit strength and achieve a low financing rate.

 

Confidential Discounting facility

Invoice discounting can also be carried out confidentially.  This means that the customers will be unaware of the financing, allowing the businesses to continue building a strong relationship with their customers.

 

Spot vs Whole Turnover Invoice Discounting

 

Spot invoice discounting allows businesses to sell invoices as and when needed.  It gives a full flexibility for business to drawdown funds.  This may be more suitable for a more project-based business such as event management, media companies, construction, etc.

 

Whole Turnover Invoice Discounting is suitable for businesses that have regular sales.  For example, whole sales distributor, long term monthly contract with customers, human resource providers etc.

 

How InvoiceInterchange Can Help Your Business

 

At InvoiceInterchange, we offer a simple and flexible invoice discounting / invoice financing online solution, offering both disclosed and confidential discounting.  You are able to opt in for either confidential or disclosed facility, as well as spot or whole turnover invoice discounting.

It is extremely simple and quick that funds will be available within 24 hours.  We offer a personalised customer support, where all your business need will be carefully analysed and resolved.  There are no lock-ins or hidden fees.

 

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