The invoice discounting definition is often presented as a straight-forward SME finance option.
Invoice discounting involves the financer’s purchase of some or all of the debts outstanding to your business.
- you receive the money in advance of the invoice due date;
- when your customer pays the invoice, the money goes straight to the invoice finance provider to a trust account in your businesses name;
- the invoice finance provider takes the money advances and their fee and forwards you the rest;
- with invoice discounting, the customer typically isn’t aware that they are paying a funder.
Invoice finance can be a convenient way to maintain cash-flow, but it can be expensive and it does require ongoing administration from the business. If you invoice often and have a wide customer-base, invoice factoring may be a more convenient option.
Before you enter into an invoice discounting or factoring facility agreement, it is important that you know exactly how it will operate, and the day-to-day requirements. Unlike other kinds of loans, invoice discounting is not “pay and walk away”.
The experts in invoice finance, our team is here to provide timely and accurate advice in relation to your SME invoice finance arrangements. Contact us to discuss your needs and obligations.