Invoice factoring and invoice discounting both help ambitious companies expand and grow.
They refer to the same essential process: an asset-based working capital solution that allows businesses to get advances on cash they are due from customers, rather than waiting for those customers to pay. For many businesses, waiting for payment can cause real problems, and prevent them from investing in growth. The various forms of invoice finance allow businesses to free up capital to free up capital tied up in invoices with long remittance terms.
Factoring and invoice discounting, have become a major source of working capital finance since the restriction of bank financing, as a result of the credit crunch. Invoice finance is more attractive to a bank because it depends on the collateral of the invoice due from the debtor. New, post-credit crunch bank capital regulations have resulted in banks transitioning companies away from unsecured loans and overdrafts and on to this mode of lending.
- You provide the goods/services to your customer and invoice them
- You send the invoice details to the invoice finance provider
- Funds are made available of a certain percentage of the face value of the invoice. Usually within 48 hours (see different factoring companies for invoice advance % details)
- Either your own credit controller or the invoice finance provider’s sales ledger service carries out the invoice collection procedure
- When your debtor pays, the balance of the invoice is made available to you – less a service fee
Types of invoice finance
Confidential invoice discounting
Confidential invoice discounting is an area of invoice financing that can be arranged confidentially, so that customers and suppliers are unaware that the business is being advanced capital against sales invoices before payment is received.
Invoice discounting funding limits
In the case of invoice discounting many companies do not assess individual debtor accounts, but protect themselves against the insolvency of debtors by relying on a good spread of the business and a provision to protect themselves against undue concentration of a large proportion of sales on individual debtors.
Selective invoice discounting
Selective invoice discounting, like spot factoring, is where single receivables are sold to a third party. Factoring facilities are traditionally whole-turnover, whereby, the entire sales ledger of a company must flow through the factor.
Whole turnover invoice discounting
Whole turnover invoice discounting is different to selective invoice discounting or spot factoring in that every invoice must be sold in a whole turnover facility, irrespective of need.
MarketInvoice as an alternative
MarketInvoice offers Invoice Discounting on a flexible and cost-effective basis, allowing businesses to unlock the cash in their invoices within 1 to 2 days.
MarketInvoice offers a new, innovative take on invoice discounting, whereby businesses can sell individual invoices in a flexible process puts them in control as never before.