What is Invoice Discounting? How it works and which industries can benefit.

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Did you know?

  • Invoice Discounting is one of the easiest ways for SMEs to free up valuable working capital
  • Discounting your receivables is far easier than obtaining a traditional loan and does not create any debt for your business
  • Over 50% of SMEs who apply for traditional bank loans and credit lines are declined and are ultimately unable to meet their funding requirements to grow their business
  • More than 80% of failed businesses say cash-flow limitations contributed to their downfall

What is Invoice Discounting?

Despite the above, Invoice discounting remains one of the most underutilised funding options for SMEs. Eligible businesses continue to take on crippling debt in the form of bank loans and credit lines in an effort to stay afloat. And so starts the vicious cycle of keeping up with ongoing cash shortfalls and continued interest payments.

Invoice Discounting is a finance option which can prevent this vicious cycle by allowing you to access a cash advance on your receivables quickly. Any business that invoices clients for goods or services, after delivery, can convert their accounts receivables into cash by selling their invoices to an invoice discounter. You will receive a percentage of the invoice value as immediate cash which you can use as working capital to grow your business. It really is that simple and the real kicker is it’s cheaper than typical funding!

WATCH: What is invoice discounting and how it works

Which industries can benefit from Invoice discounting?

1. Professional Service Providers

Invoice Discounting can assist an array of professional services that often offer credit terms to their clients. Waiting up to 90 days for payment can cause a huge strain on cash flow and it is often difficult to balance chasing clients for payment whilst maintaining a valued client base. These companies can include:

  • Security companies
  • Accounting firms
  • Marketing Companies
  • IT service providers
  • Legal firms
  • Consultants

2. Transportation and Logistics

Any SME trucking and logistics company will tell you how difficult it is to compete against the very large players. Cashflow is key to covering payroll, increasing fuel prices, upkeep, and maintenance, however, offering very tight payment terms to clients often pushes them out of the market completely.

That is why invoice discounting is a great solution for so many trucking and freight companies to bridge this cash flow gap whilst allowing them to offer clients flexible payment terms and remain competitive. Whether you need a temporary ‘stop-gap’ solution or a longer-term funding line, Invoice Discounting can be a flexible solution to ensure your business grows from strength to strength.

3. Wholesale and distribution

These companies typically operate on lower margins than most. The key to success within this space is a fast inventory turnaround time and economical minimum order quantities. Flexible payment terms with customers are often necessary to remain competitive. This can leave a business with severe stock replenishment constraints.  Invoice Discounting can offer immediate cash relief to ensure inventory levels are always maintained and the company remains competitive within the market.

Are you looking to free up valuable working capital?
Are you ready to raise cash quickly while saving time and labour?
Turn your invoices into cash, today!

4. Manufacturing

Due to the competitive nature of this industry, SMEs are often forced to offer clients flexible payment terms to secure current and future orders. This often puts an enormous strain on the business's cash flow to pay for materials, equipment, and overhead costs. 

Invoice Discounting offers a solution for SME manufacturing businesses to close this long cash cycle gap.

5. Recruitment Industry

Recruitment and staffing agencies spend a great deal of time and money on selecting and placing candidates before they receive any form of payment- often having payment terms of 90-120 days. Invoice Discounting can ensure these agencies can get paid straight away to cover their essential payroll and overhead costs that keep their companies ticking over (and market reputation to find the best talent intact!)

If you’re from one of these industries, or you think your business might benefit from invoice discounting, get in touch with us. We’ll work with you to find the best financing solution because finance isn’t one-size-fits-all. 

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