Are you an SME or startup and would like a way to ease those occasional cash flow woes? Maybe you have heard about invoice discounting but have never really considered it because you weren’t too sure what it is? Here we take a look at 5 things you probably don’t know bout invoice discounting and how it could help your business.
It’s Not Invoice Factoring
One of the big misconceptions about invoice discounting is that it exactly the same as invoice factoring. It isn’t. Although in many ways they are very, very similar, there are some fundamental differences around who runs the sales ledger and collects the money as well as whether your customers will know you are using these kinds of services. We’ll explore these below.
Your Business Retains Control Over Your Own Sales Ledger
With factoring, you sell your invoice to the factoring company and they take the role of managing the sales ledger, credit control and chasing customers for the payment of the invoices. This is not quite how invoice discounting works. With invoice discounting, your business retains control of its own sales ledger and chases payment in the normal way.
Your Customers Won’t Know You Are Using Invoice Discounting
With invoice factoring, it is clear to your customers and clients that you are using invoice finance because the factoring company are the ones collecting the payments. Some companies don’t like this fact about invoice factoring, despite it being a common occurrence and something that because so many customers are using, it hardly raises an eyebrow. However, with invoice discounting, no-one will know that you are using these types of services because you are collecting your own payments.
It’s Much Quicker Than Traditional Bank Finance
If you are a startup (or indeed any small to medium sized business) then you’ll know that if you try and access traditional bank finance then it can be a very long, drawn out and frustrating process that often requires you to jump through hoops. More so, it can also often be a very negative experience despite everything you do, you will be denied finance for the very flimsiest of reasons. However, like invoice factoring, invoice discounting is much easier to access for startups and small businesses and much quicker too. This quick access to finance can sometimes the difference between whether a business survives or goes to the wall.
Invoice Discounting is a Source of Finance That Grows As You Grow
The great thing about invoice discounting is that as your business’s level of turnover increases and the value of your outstanding debtors grows, this also entitles you to access more cash through invoice discounting. That means not only can invoice discounting ease cash flow worries in the short term, it can help provide that boost to your business and help it to grow in the long term too. It’s very comforting to know you have a readily available line of finance ready and waiting for when you need it. Whether It’s for research and development or purchasing new tech that will differentiate you from the competition, with invoice discounting you can have access to a growing amount of finance when you need it.
For an informal chat on invoice discounting please contact us on 01827 707680 without any obligation whatsoever. We’ll discuss the various options open to you safe in the knowledge that we will only ever introduce you to one of the few discounters that perform as well as they claim and as one of the UK’s leading specialist brokers all of our services are completely free of charge.