Invoice Discounting

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Invoice Discounting

This type of Invoice Finance is similar to Invoice Factoring. The main difference is that invoice discounting is normally confidential (know as CID - Confidential Invoice Discounting).  The credit control function stays within your business and your customers won't know you are using a finance provider.

 

Similarly, to invoice factoring, you still use your unpaid debtors as security and in return the invoice discounting provider advances you a percentage (to around 75/80%) of the total cash due.  Once your customer pays your invoice, the lender will then remit you the balance owed less their fees.

Is invoice discounting right for me?

This product is designed for businesses who offer trade terms to their customers, as the discounting provider will lend you money against your unpaid customer invoices.

This allows a business to receive most of the invoice value immediately, saving you the time of having to wait to get paid.

 

The process is simple: You send your invoices to your customers and then upload them online to the invoice discounting provider. They will then send you the funds at your agreed rate.

 

To summaries invoice discounting:

 

  • You are responsible for chasing your unpaid invoices yourself
  • Your outstanding invoices are sold to the discounting provider
  • The facility is confidential, so your customers won't know you've financed the invoices
  • The discounting provider may insist on credit insurance to minimise your exposure should a debtor fail
  • If your customer is late paying it won't affect your cash flow
  • Your customer would normally pay into a "trust account" controlled by the lender

 

The main benefit with invoice discounting, apart from the immediate cash flow boost, is the ability to retain the credit control function within your organisation.  However, because of this the provider will ordinarily offer a lesser percentage of cash upfront, this is because their risk in this instance is greater.

A working example

Let's say you have a discounting facility with a lender that provides you 75% of your invoice values upfront.

 

  •  You raise an invoice to your customer for £10,000
  •  You send the invoice to your customer and upload it online to the lender
  •  The lender advances you 75%, so you receive £7,500 on the same day
  • Your customer pays the £10,000 into an account controlled by the lender.  As this is a confidential invoice discounting facility the customer will think they are paying you directly
  • The lender then pays you the remaining £2,500 less their fees.

 

The above is a very basic illustration designed to show how the facility works in principle.  The terms offered by a lender can vary.  The lender may impose a maximum facility limit, minimum days overdue, or a minimum facility period etc.

 

Confidential invoice discounting facilities are normally better suited for larger company or those with complex trading agreements.  It is possible to have a facility that covers UK and foreign customers; these are assessed on a case-by-case basis.

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How much does it cost?

Due to the subjective nature of these facilities the costs can vary.  Here at MyInfinity we will always present you with a full, transparent costs summary prior to you accepting any facility.

 

To summarise the costs: Based on the above example of an invoice of £10,000 with an initial 75% draw down you could expect to pay anything form £250 - £300 per invoice.  There may be other costs, such as facility management fees and rebates.

 

Like everything, it is always worth shopping around when your discounting facility is reaching the end of its term as the fees and rates are negotiable at this stage.

 

We can do this for you. Complete our callback form and one of our Invoice Finance specialist will contact you to discuss your requirements.

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Trading/Registered Address: MyInfinity Finance Limited: Suite 20, River drive, Cookson House, South Shields, NE33 1TL

 

MyInfinity Finance Limited acts as a credit broker and are not a lender.

Applicants must be aged 18 and over. Terms and conditions apply. Guarantees and indemnities may be required.

We do not charge our clients for any of our services but will receive commission from any lenders that we are successful in obtaining you finance from.  We will never ask you for any upfront payments. Our services are for UK businesses only.

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