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Invoice Discounting

A confidential cash flow solution

Invoice Financing for Established Businesses

Certain invoice finance services offer the added benefit of relinquishing you from the responsibility of chasing customer payments. Yet this isn’t ideal for a business that already has an established sales ledger process tailored to do just that. If you’re one of these businesses, a simple financial service that releases cash flow from your invoices, whilst having minimal impact on your current processes and customer relationships, is ideal. If this describes your business’ needs, invoice discounting may be perfect for you.

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What is Invoice Discounting?

Invoice discounting provides working capital finance by releasing the capital that’s tied up in your unpaid invoices, however, unlike invoice factoring you will retain responsibility for credit control meaning that it’s your job to chase your customers for payment.

For this reason, to be eligible for invoice discounting you will need to demonstrate that you’re an established business with the necessary controls and procedures in place. As it is a funds-only agreement, there needs to be a good degree of trust between you and your invoice discounting company.

Invoice discounting is a funding solution for SMEs that are selling business-to-business on credit terms; rather than waiting for 30, 60 or 90 days for your customer to pay, the funds can be in your bank account within 24 hours of the invoice being raised.

It can also be known as invoice finance, sales ledger finance or receivables finance.

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How Does it Work?

Invoice discounting is best suited to SMEs that are selling business-to-business on credit terms and where you issue invoices to your customers in arrears.

You should complete the job as usual and send the invoice to your customer. At this point, you would notify your invoice discounting company and they would advance a percentage of the invoice value e.g. 85% within 24 hours.

Here’s the main difference to invoice factoring: when the invoice is due for payment, you will contact your customer to ask for payment. Your customer will pay into a trust bank account which is in your name but operated by the factoring company.

Once your customer has paid the invoice, the initial advance will be repaid and the invoice discounting company will take their fees, then the remaining balance e.g. 15% will be made available to you.

Most invoice discounting facilities are confidential hence the term confidential invoice discounting which you may have heard. This means your customers aren’t aware that a lender is involved in the background.

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How How much does it cost?

There are two main fees with invoice discounting: the service fee and the discount rate.

The service fee is charged as a percentage e.g. 1% of every invoice that you assign to an invoice discounting company. The rate itself is linked to several factors but one of the major ones is turnover; generally, higher turnover will command a lower service fee. On a like for like basis, invoice discounting tends to attract a lower service fee than invoice factoring as the lender isn’t undertaking credit control.

The discount rate should be viewed as an interest rate and it is charged based on the amount borrowed. For example, 3% over base rate on the balance. Again, the rate itself is linked to several risk associated factors.

There may be other fees associated with setting an invoice discounting facility up such as the arrangement fee, which is usually a percentage of the funding limit, and a survey or audit fee for the lender’s due diligence. Because the lender is less involved in this type of funding versus invoice factoring, there’s likely to be a regular requirement for audits so they can monitor your situation.

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The Benefits of Confidential Invoice Discounting

The main benefit to invoice discounting is the impact it will have on your cashflow. Rather than waiting for your customers to pay and having to make awkward phone calls chasing payment, the funds will already be in your bank account which you could use to pay your suppliers earlier in return for an early settlement discount, for example.

With a confidential invoice discounting facility, your customers won’t know that a lender is involved; whilst this isn’t usually an issue, some businesses prefer to keep this information private. As you will be responsible for credit control, you will still be speaking to your customers on a regular basis and nourishing those relationships.

Having a funding partner can also help to de-risk your business. The invoice finance company will carry out due diligence on your current customers and any potential customers to make sure they are creditworthy.

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Key Features

  • Funding based on outstanding invoices
  • Advance of up to 90% available
  • Funds available within 24 hours after invoice raised
  • Outsource credit control to the professionals
  • Working capital finance solution
  • Disclosed and confidential options
  • Bad Debt Protection is available

What should I do next?

At Ping Finance, we have a professional team of experts in invoice factoring, providing excellent customer service and matching you with your perfect invoice factoring lenders.

To find out how we can help you, please fill out the quick enquiry form by clicking “Let’s Talk” or you can contact us on 0330 058 2330. Our offices are based in Bolton, Greater Manchester.

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Finding Your Perfect Invoice Discounting Facility

At Ping Finance, we know that it can feel overwhelming when trying to decide on the best funding method for your business. But it doesn’t have to be this way; Ping Finance is happy to offer confidential well-informed advice that is tailored to you.

Or if you already know that invoice discounting is the right move for your business, contact us today or call 0330 0582 330 and let us match you with your ideal lender.

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Ping Finance is a trading name of Ping Finance Limited which is registered in England and Wales under Company Number is 10973327, whose registered address is Ground Floor, Unit B Lostock Office Park, Lynstock Way, Lostock, Bolton, England, BL6 4SG. Ping Finance Limited is also registered with the Information Commissioner under Registration Number ZA447449.