What is Invoice Discounting?

For most companies, debtor balances are by far the largest asset in their balance sheets. They may also turn into cash at a much slower rate than the business would like, often representing two or three months’ sales.

Invoice discounting provides the complete answer to slow-paying customers, shortage of working capital and, if needed, protection against bad debt losses.

Invoice discounting allows you to raise finance based on the value of your outstanding invoices. There’s no need for you to ever have to go through the pain of renegotiating your facility – unlike a bank overdraft.

It can make available 90 per cent of the invoice value as soon as it has been raised and the remainder is made available when the customer pays.

Growing businesses, in particular, often find that invoice discounting is a more flexible source of working capital than bank loans or overdrafts, as finance is made available to your business in line with the level of its sales.

Invoice discounting is suitable for businesses with good credit control procedures, with turnovers ranging from around £1m to £100m.