Invoice Discounting

By Author: Abbey smith
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Invoice discounting is a great way of raising money for your business and doing so quickly. However, it is a financing option that a surprising number of businesses have never heard of, let alone use.

To understand how it works you have to change your mindset slightly. You have to see the money that your customers owe you as an asset rather than simply as a debt. Your outstanding invoices are an asset that is similar to any other physical asset that your company owns. You can borrow against your invoices in the same way you can any other asset.

How Invoice Discounting Works

When you do a job for someone, you raise an invoice as normal. However, instead of simply waiting 30 to 55 days to be paid you borrow money against that invoice instead. The financier gives you up to 90% of the value of the invoice. When it is time for your customer to pay their invoice they pay the financer instead of you.

The advantages to running your finances in this way are obvious. Cash flow is a huge problem for many firms, and invoice discounting gets around this problem.

Some firms use this process every month, ...
... but most use it to help them to get through difficult months. That is months where cash flow is a problem. Many large businesses use this form of financing to finance large projects to help them to expand into new areas.

The Advantages of Invoice Discounting

There are several advantages to this form of financing. Whilst it is not a particularly cheap form of financing it is not expensive when you consider how simple and flexible it is to use. It is one of the fastest ways of raising money for your business.

Provided you use a good broker, you can get a good deal.

Invoice discounting is not for all businesses and how many of your invoices you can borrow against is partly dependent on the credit worthiness of the person who owes you the money. However, if you have never considered this form of financing before it is certainly worth finding out more about by speaking to a factoring broker.

XL Business Finance offers a full invoice discountingservice. They have already helped thousands of firms to raise funds, so why not contact them to see if they can help you too.