What is the best option for Short Term Financing Sources?

When cosidering short term financing sources, Invoice Discounting is the most simple and popular form of Invoice Finance.  This option offers you business a way to release cash tied up in your outstanding invoices (also known as the businesses debtor book). More simply put, it allows you to advance against money owed to you in the future, and is a popular alternative to an overdraft facility, widely used by businesses.


The Invoice Discounting company takes a Debenture (fixed and floating charge) over the debtor book and assets of the business, meaning that if the business fails, it can step into the businesses shoes and collect the money owed. With this security of short term financing sources, it allows the finance company to lend more than would usually be the case with an overdraft as the risk to them is typically lower.


The main advantage of Invoice Discounting is the ability to borrow up to 95% of the outstanding invoices to customers, providing immediate and crucial cashflow for your business. Most Invoice Discounting facilities are provided on a Confidential basis, meaning that you do not have to disclose to your clients that you are using the facility.

Key Features

Receive up to 100% of your sales invoice 

You can unlock cash tied up within your business to support your working capital cycle and fund your growth ambitions

Quick funding within 24 hours of invoice

With Invoice Discounting, approval is quick and easy. In most cases you can draw down funds against your invoices within 24 hours

Utilise the value in your debtor book

Invoice Discounting allows you to borrow against the security of your debtor book and often allows you to avoid pledging personal security or other business assets often required to secure an overdraft facilit

A facility that grows with you 

As your business grows, an Invoice Discounting facility typically grows with you, helping to smooth out cash flow hurdles that often hinder businesses without this facility 

Receive up to 100% of your sales invoice 

You can unlock cash tied up within your business to support your working capital cycle and fund your growth ambitions

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How does Invoicing Discounting Work?

Invoice Discounting Costs

As a good option for short term financing sources, Invoice Discounting costs vary from business to business but are broadly split into the following categories


Arrangement Fee / Survey Cost 

Some lenders will charge a fee to carry out due diligence, known as a survey and there may also be an arrangement fee, which is the cost of setting up the facility. Some will also charge a small annual renewal fee thereafter.


Service Fee 

The Invoice Discounting Costs include a service fee for the day to day administration of the facility, usually charged as a percentage of the gross invoice value but sometimes this can be a pre-agreed fixed monthly amount. When this is charged as a percentage, there is often a minimum monthly charge agreed at the outset.


Discount Fee 

This is calculated as a percentage of the total funds you borrow.  


Ancillary costs

Some invoice finance companies will charge additional ancillary fees, which can include CHAPS payment charges for when you need to draw down funds on the same day.

Is Invoice Discounting Right for your Business for Short Term Financing Sources?

Invoice Discounting is a viable funding solution for many business sectors including, Haulage, Recruitment, Manufacturing and many more, but how do you know if it is the right solution for your business?


Firstly, Invoice Discounting is only suitable for businesses that sell to other businesses and cannot be used to fund invoices to private individuals.


If your business is growing, either organically or by acquisition, there is a good chance Invoice Discounting could be a great solution but it can also work well for businesses in difficulty, or those that are looking to avoid raising debt that will lead to costly monthly repayments.


Cashflow will always be ‘king’, and by utilising Invoice Discounting you can help to alleviate the stress caused by cash flow worries. 


Contact us to speak to one of our experts and find out if Invoice Discounting is the right solution for your business.