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Invoice discounting is a type of invoice finance that’s widely used by UK businesses. It allows you to raise finance against your sales ledger on an ongoing basis so you can release the funds tied up in unpaid customer invoices. It can provide a welcome cash flow injection that helps you invest in your business, plan ahead with confidence and ride out seasonal fluctuations.
Are you fed up of waiting 30, 60 or 90 days for your customers to pay their invoices? At UK Business Finance, we can help. We search the whole market to find you the best invoice discounting deals that meet the needs of your business. There are no fees to pay or exclusivity contracts to sign, and we can even complete the finance applications on your behalf.
In an invoice discounting agreement, you effectively sell your customer invoices to a lender who pays you a cash advance based on a percentage of the invoice’s value - usually around 80% to 90%. You typically receive the money within 48 hours to give you a welcome cash flow boost. Once your customer has paid the invoice, the finance provider hands you the remaining balance minus their fee.
Invoice discounting is very similar to factoring. The key difference is that with invoice discounting, your customer will not necessarily know that you’re using a third-party finance provider. That’s because you retain control of the collection of payments and communicate with your customers as normal. The downside is that you still have to chase invoices yourself. The upside is that you can protect the good relationships you have with your customers.
Invoice discounting is a flexible and fast method of finance that gives you more control over your cash flow. Here are some of the benefits:
Invoice discounting tends to be used by established businesses with reliable turnover and robust credit control processes. It could be a good fit if:
There are also some downsides to consider. Invoice discounting will reduce your profit margin, as a small percentage of every customer invoice is paid to the finance provider. It can also be difficult to access as a small business, and if a provider is willing to lend to you, it will typically be at a higher fee.
As an independent commercial finance broker, we can help you find the most suitable invoice discounting product and provider at the best rates. Use our tool to request a quote or get in touch to discuss your business’s requirements with our team.
We work across a wide range of sectors throughout the UK, providing specialist advice to each sector.
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