Invoice discounting is a great way to raise money for your business. It is used by many companies throughout the world as a way of helping them with their cash flow. Simply put invoice discounting allows you to borrow money using what you are owed in invoices as collateral.
The Benefits of Invoice Discounting
There are many benefits to using this kind of service to raise money for your company. First and foremost, it is a very quick way of raising funds. Once you have a working relationship with a broker, they can arrange money in as little as 24 hours. It is an extremely simple financial arrangement with very few pitfalls.
If a customer owes you £10,000, the best brokers will lend you 90% of that £10,000, in other words £9000. The invoice is then paid to the broker and the remaining 10% is given to you at that point. However, of course there are fees that are deducted from the amount. Provided you use a well-established and trustworthy broker those fees are easy to predict and manage. In many cases borrowing money, this way is completely confidential. Even though your customers has to pay the invoice discounting broker it can be done in such a way that they are not aware of the fact that this is happening.
Who Qualifies for Invoice Discounting?
In theory, any company can benefit from using this form of financing. However, understandably brokers do put limits on those that they are happy to lend to in this way. Typically, you need to be turning over around about half a million a year and be profitable. Most brokers do not worry about what kind of company you are. They are happy to lend to Limited companies, sole traders and public limited companies. You may also have to prove that you have an effective credit control procedures in place.
Many multinational firms use this form of financing on a regular basis. They do so because it is an easy way of raising cash for large projects. It is also great way of spreading risk.
However, invoice financing is not just for large multinationals. A lot of firms in Bradley County use this method to finance their businesses.
Use invoice financing to fund big projects
It is a fast way to raise funds, which means that it is ideal for getting you through big projects. No matter how well you plan something like an extension or the launch of new lines things have a habit of not going 100% to plan. Therefore, it is always useful to have easy access to extra funds.
Invoice financing is perfect for this. You can normally get an immediate answer from the lenders that provide this service and many companies will send you the funds you need the day they agree your application.
If you are interested in invoice financing or have used the service yourself please leave a comment below.