Invoice Discounting

Invoice Discounting (also known as receivables or debtor finance) is now regarded as a critical and cost effective facility that is offered by most of the major banks and a number of specialist lenders.

If a business must give credit to make sales and is carrying trade receivables, invoice discounting can be an outstanding facility to fund the development of the business by allowing a business to borrow against its trade debtors.

The facility is targeted at a broad range of business sizes, to provide an  alternative to. or complimentary to an overdraft facility for small to medium  sized business through to the larger commercial market. Businesses can borrow amounts from $50,000 to $25,000,000 or up to 80% of acceptable outstanding trade debts.

Key Features of Invoice Discounting

An invoice discounting facility provides - subject to meeting lending criteria

• Initial advance up to 80% of invoice value. - The balance less a service fee is paid to the business when the debtor pays their account/
• No bricks and mortar property security required.
• Increasing funding levels as the business grows.
• Interest rates comparative with overdraft facilities
• Confidentiality The customers would be unaware of the facility and the invoicing and credit management remains with the client.

The facility is priced and funds advanced on the strength of the debtors and the financial performance and management skills of the business.

The facility provides an initial funding to an agreed percentage against the current acceptable debtors ledger and thereafter funded on regular basis (usually weekly) against the invoices as raised. The regular funding is usually effected within 24 hours of the electronic presentation of a batch of invoices.

Invoice discounting provides cash against invoiced credit sales, so a business does not have to rely on the vagaries of debtor payments to provide cash flow.

Project Claim Finance for Sub Contractors - 29 August 2019 - due to prevailing conditions in the apartment construction sector most lenders who prevously provided progress claim finance have withdrawn the product. 

Payroll Finance for Contractors, labour hire and recruitment businesses - see more here

Advantages

The working capital provided by invoice discounting improves a business’ cash position by enabling it to:

• Take on more business and finance the additional production and sales and in turn make more profit.
• Pay suppliers promptly and take advantage of discounts for prompt payment and bulk purchasing.
• Finance additional stock.
• Discontinue prompt settlement discounts to customers.
• Offer extended terms of credit to your customers.
• Finance promotional activities to generate increased sales.
• Pay outstanding taxes.

12 good reasons to consider using Invoice Discounting / Debtor Finance in your business