Invoice discounting

Invoice discounting has seen phenomenal growth in recent years, partly fuelled by the banks’ desire to move away from traditional overdraft facilities. As with factoring an invoice discounting facility will give the company access to funding at up to 85% of sales invoices within 24 hours of the invoices being raised.

Where invoice discounting differs from factoring is that it is the provision of finance only with no sales ledger management or credit control undertaken by the factoring company.

This tends to make invoice discounting more suitable for larger companies with established accounting systems and as the security is less for the factoring company they tend to offer this type of facility to companies with a slightly stronger Balance Sheet than is the case for factoring.

As with factoring the main advantage of invoice discounting is that the availability of funding isn’t fixed as it is with more traditional bank overdrafts but will automatically increase in line with increasing sales so growing companies are safe with the knowledge that the funding will always be there to cope with growth.

There are a large number of companies actively competing for invoice discounting business but differences in the operational methods of each company mean that the invoice discounting company that might be the most suitable for one company could cause financial problems for the next.

Whilst there seem to be a proliferation of websites offering online quotes for invoice discounting they are all affiliated to the same company and whilst an automated system can seem like a good idea it has sufficient drawbacks to make us wary so we have preferred to act as brokers in the old fashioned way by discussing the details of each business individually with the client and then proposing the most appropriate factoring company based on that information.

Our advice is completely independent, free of charge without any obligation whatsoever so please feel free to contact us to discuss matters.

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