What is invoice discounting?
It is a type of invoice finance offered to companies who want raise finance secured on their sales ledger.
Invoice discounting is a way to gain access to money owed to your business from unpaid invoices.
Unpaid invoices are “sold” to a specialist lender, who provides you with a portion of the total amount of invoices sent to clients.
How much the lender will finance per invoice varies, however most will finance up to 90% of the total invoice amount.
Discounting is similar to invoice factoring, however the main difference is that you still remain in control of your sales ledger and therefore debts. Because of this, fees tend to be lower.
SMEs are currently chasing £50 billion in late payments from outstanding invoices.
Oliver Prill, Tide’s chief executive, said: “It is, however, shocking to see exactly how much time SMEs, and particularly the self-employed, are wasting by having to chase clients to pay promptly. Cash flow is crucial for SMEs, and just a few late payments can tip them into danger of becoming insolvent.” [source]
Much of this cash could be released using invoice discounting.