Invoice Discounting - Securing A Loan Against Your Invoices
- Date: 2008-11-22 - Word Count: 294
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Invoice Discounting is a method of using the invoices that your company issues as security for a business loan. The loan usually covers up to 90% of the value of the invoices that your business has issued.
Invoice Discounting is similar to Factoring which is another form of Invoice Finance which secures funds against the value of your invoices. The difference between the two is that Invoice Discounting allows you to keep control over your debt management.
When a company uses Factoring services they will usually give control of their debt management over to the lending company. This means the lending company will perform debt collection, credit control and other similar procedures.
Invoice Discounting gives a business a little more freedom to control their own affairs compared with Factoring.
When should a business use Invoice Discounting?
If a business needs to improve it's cash flow and needs funds quickly, Invoice Discounting can provide the funds. One of the benefits of Invoice Discounting is that the funds can reach the borrower often within 24 hours of an agreement being in place with the lender.
Invoice Discounting helps grow a business by helping it to overcome the uncertainty of when invoices will be paid. By establishing a more regular pattern of payment a business can then fund it's own growth in line with the sales of the company.
Businesses can only borrow as much as their invoices are worth so Invoice Discounting allows them to constructively increase their level of borrowing as their sales increase.
Who is Invoice Discounting for?
Invoice Discounting is generally only available to businesses that have a turnover which exceeds £100,000. So it is not ideal for start-ups or very small companies. A solid trading history and good credit rating often help a business obtain a secured loan more easily.
Invoice Discounting is similar to Factoring which is another form of Invoice Finance which secures funds against the value of your invoices. The difference between the two is that Invoice Discounting allows you to keep control over your debt management.
When a company uses Factoring services they will usually give control of their debt management over to the lending company. This means the lending company will perform debt collection, credit control and other similar procedures.
Invoice Discounting gives a business a little more freedom to control their own affairs compared with Factoring.
When should a business use Invoice Discounting?
If a business needs to improve it's cash flow and needs funds quickly, Invoice Discounting can provide the funds. One of the benefits of Invoice Discounting is that the funds can reach the borrower often within 24 hours of an agreement being in place with the lender.
Invoice Discounting helps grow a business by helping it to overcome the uncertainty of when invoices will be paid. By establishing a more regular pattern of payment a business can then fund it's own growth in line with the sales of the company.
Businesses can only borrow as much as their invoices are worth so Invoice Discounting allows them to constructively increase their level of borrowing as their sales increase.
Who is Invoice Discounting for?
Invoice Discounting is generally only available to businesses that have a turnover which exceeds £100,000. So it is not ideal for start-ups or very small companies. A solid trading history and good credit rating often help a business obtain a secured loan more easily.
Related Tags: business loans, commercial loans, factoring, invoice discounting, secured business loans
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