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Invoice Discounting explained

Invoice discounting is purely a means to be obtaining cash against your unpaid invoices. The facility can be provided on a confidential or disclosed basis.  Normally the facility will pay  up to 85% of any invoices your business raises. Credit is provided for up to 90 days however under certain circumstances there are a number of invoice discounting providers that will provide up to 120 days. Unlike a bank overdraft the level of funding is not restricted by the profitability length of time and credit worthiness of your business. The facility will grow with your business and as such it provides the ideal working capital facility.

Invoice discounting is different from factoring because all factoring facilities are provided on a disclosed basis and factoring also offers credit control. Invoice discounting is simply a meansof obtaining cash against your outstanding invoices however not all businesses will be eligible for a undisclosed facility. From the finance company’s point of view invoice discounting is a far more riskier facility. This is because the finance company has little control  over your customers. It is a more trusting facility in that the customer will raise an invoice and on a weekly, daily or monthly basis copies of the invoices will be provided to the finance company and the finance company make available 85% of the invoices available as immediate cash. The finance company doesn’t check with your customers that you have raised the invoice. The remaining 15% of the invoice is paid to the customer as and when your customers settle your invoices. Obviously the finance company will deduct an amount for interest owing and a small amount for the service fee. The service fee is usually a percentage of the overall turnover.

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XL Business Finance Ltd is a privately owned and independent business financing company with established links to many of the UK's leading finance houses. XL Business Finance provides a viable alternative to high street banks that lack the flexibility and imagination to provide a solution to most business users requirements. XL Business Finance can provide a full range of business financing solutions and we ensure a high level of customer service and pride ourselves on quick decisions. Our independent status will ensure any offer of funding and asset finance leasing is best suited to our customer’s needs.

XL Business Finance, Eaton Place Business Centre, 114 Washway Road, Sale, Cheshire M33 7RF UK.

 

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