Invoice discounting for small business is a viable option for those looking to free up cash flow. Can you get invoicing discounting for your small business, yes, but what are the benefits, and should you do it? In this article we’ll look at the benefits of invoice discounting, how it works and why you should or shouldn’t do it for your business.
What is Invoice Discounting?
Invoice discounting is sometimes confused with invoice factoring, but the two are very different. Invoice discounting has similar results as invoice factoring. Both options provide the small business with a simple and effective way of raising capital for the business and both will inject cash into the business based upon your invoices and sales. However, discounting means that all debt collection remains in the business and isn’t passed over to the factoring provider.
Why Choose Invoice Discounting for Small Business?
There are several reasons to choose invoice discounting for small business, here are some of the most popular.
- It’s super-fast and easy to do. You can quickly get access to funds that are currently tied up in the invoices. In fact, it only takes approximately 24 hours to have the cash released.
- Stay on top of current expenses and operation costs with the cash flow increase achieved through invoice discounting.
- Remain in control of your own credit control. No need to hand over control to a third party.
- All communications with your customers will remain under your control. They will remain in contact with you and they don’t need to be informed of your funding.
There’s an option to include bad debtor protection for small businesses looking for peace of mind.
What is Invoice Factoring?
Invoice factoring provides you with quick access to funds using your invoices. It is very similar to invoice discounting for small business but there’s one main difference to be aware of. With invoice factoring, the credit control of your business is passed over to the factoring provider. All debt collections and such are dealt with by them, allowing you to put all your energies into the operations.
There are advantages to choosing invoice factoring, which are:
- Gives you access to cash that is tied up in invoices. Money is made available within 24 hours.
- The business can keep on top of outgoings and operation costs.
- The credit control and ledger management are outsourced to your factoring provider.
- Adding bad debtor protection is available to provide stability for the business.
- You will have access to more funding as the business develops.
Having options like these helps business find funding without having to run to the bank. It’s a great way of remaining on top of the costs involved in running the business, remaining active and obtain further business. The discount invoicing is the perfect option to choose for businesses that wish to remain in control of the debt collection and other credit control processes.
Invoice Discounting for Small Businesses
Invoice discounting is increasing in popularity, but it’s down to each individual business to find out if it’s the right option for them. This type of funding is different from the traditional types of financing that are more commonly known. The process of invoice discounting is quite simple. The business uses an invoice that has been raised and passes it over to the finance provider. The provider pays out a percentage of the invoice up front. Once the customer clears the invoice the money is sent to the provider along with any fees, the rest goes to the business.
The main advantage is that the money that is usually held until the invoice clears if freed up and can be used immediately. Furthermore, the customers of the business are not told about the funding agreement as the credit control remains in-house. It’s a useful alternative to invoice factoring that involves the communications being passed over to the funding provider.
Is Invoice Discounting Right for My Small Business?
Businesses of all sizes using invoice discounting and factoring services. The simplicity and immediate action of this modern type of business funding is what makes it so popular. There are other forms of funding available so it’s advisable to do your research into each type to find the one that works for your immediate needs.
Learn More about Invoice Discounting
Invoice discounting is a great service that helps small businesses remain afloat and become established. The best course of action is to call the helpful advisers at Simply Factoring Broker and ask about the services that are suited to your business. They will help you to establish the best course of action based on your requirements and whether you wish to remain in control of your credit department and ledger management or hand it over to the funding provider.
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