What is invoice discounting and how can it be used?

Our commercial finance expertise isn’t limited to arranging commercial mortgages. We know that as a business owner, there are many ways you can use commercial finance to grow your company or ease cash flow issues that may have arisen.

One issue that many businesses experience is an invoice related cash flow problem. This occurs when your business has raised an invoice with a customer, but is yet to receive payment for this. It’s commonplace that invoices may take a couple of weeks to be paid, and you can usually account for this in your financial planning.

But for a variety of reasons, it could also take several months. This unpredictable payment pattern can make it hard to plan effectively, meaning that you could be owed large sums of money by your client, but not actually have the funds to pay your own bills. Alternatively, you may need to recoup monies you are owed in a very short time frame.

This is where invoice discounting can help you. Invoice discounting is a financial service offered by a number of lenders, who will pay you a percentage of the money you are owed upon issuing of the invoice, at a small interest rate. With invoice discounting you can normally borrow up to 95% of the invoice amount, which is extremely helpful for growing businesses.

Invoice discounting can therefore give you clearer control of your cash flow as you will be able to access the money you are owed shortly after receiving the invoice.

This does obviously mean that you will lose a small amount of profit, but this can be a worthwhile price to pay for having a consistent and predictable cash flow. To qualify for invoice discounting, you’ll need to prove that your business has a track record of being profitable. If this sounds like something your business could benefit from, please do not hesitate to get in touch.

As an independent brokerage, Enness has unrivalled access to the specialist lending market. We can therefore confidently advise you on invoice discounting and other arms of commercial finance. If you have any questions regarding your commercial finance needs, one of our expert commercial brokers will be more than happy to take the time to discuss your case and find the best solution for your business.

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