Invoice Discounting
Invoice Discounting
Unlock Cash Flow for Your Business
Invoice discounting is a powerful financial tool that allows businesses to unlock the cash tied up in their unpaid invoices. By selling these invoices to a finance company at a discount, you can receive immediate cash without waiting for customers to pay within their standard terms. This can significantly enhance your business’s cash flow and operational efficiency
How Invoice Discounting Works
- Issuing Invoices: Your business provides goods or services and issues invoices to your customers with payment terms typically between 30 to 120 days.
- Selling the Invoice: Instead of waiting for payment, you sell the invoice to a finance company for an advanced percentage of its total value.
- Immediate Cash: Receive a large portion of the invoice value upfront, usually between 80%
- Invoice Collection: Your customer pays the invoice as usual, directly to you.
- Final Payment: Once the invoice is paid, you receive the remaining balance from the finance company, minus a discount for the period of finance based on a Prime linked interest rate and applicable service fees.
Full Book Invoice Discounting with Merchant West
Merchant West offers Full Book Invoice Discounting, providing early advances of up to eighty percent on the value of all qualifying invoices purchased. Here’s how it works:
- Confidential Facility: The facility remains confidential, meaning your debtors are not notified about the arrangement.
- Client Control: You continue to service, manage, and collect funds directly from each debtor and remit these to Merchant West upon collection.
- Comprehensive Coverage: Merchant West purchases the full debtor’s book, keeping the facility confidential and allowing you to manage collections as their agent.
- Security Requirements: Security includes the first cession of your collection bank account and the right, title, and interest in the entire underlying debtor’s book. Supplementary security is determined on a case-by-case basis.
- Advance Rate: Receive up to eighty percent of the fundable debtor’s book value.
Benefits For Your Business
- Improved Cash Flow: Instantly convert your invoices into cash, ensuring you have the funds needed for day-to-day operations, growth, or unexpected expenses.
- Retain Control: Unlike other financing options, you keep control over your sales ledger and maintain direct relationships with your customers.
- Confidentiality: The faciltiy can be confidential, so your customers won’t know you’re using this financing method.
- Flexibility: Use as and when needed, making it a flexible financing solution that grows with your business.
- No New Debt: Access funds without taking on new loans or diluting your equity, keeping your balance sheet strong and your ownership intact to achieve your expansion ambitions
Costs and Considerations
- Discount Rate: Typically applied as a Prime linked interest rate or discounting fee, depending on the applicable structure and the risk profile of your business.
- Service Fees: May include setup fees, administration fees, or monthly service fees.
- Customer Non-Payment: Depending on your agreement, you may still be responsible if customers fail to pay their invoices.
Is This The Right Solution Right for You?
This solution is ideal for businesses that:
- Have long payment terms and need to bridge cash flow gaps.
- Are experiencing rapid growth or seasonal fluctuations in cash flow.
- Prefer to maintain control over their customer relationships and sales ledger.
Summary
If you’re looking to improve your cash flow and gain immediate access to funds tied up in your invoices, this could be the perfect solution for your business. By leveraging your accounts receivable, you can ensure smooth operations, invest in growth opportunities, and maintain strong relationships with your customers.
Partner With Merchant West For Your Invoice Discounting Needs
Unlock the full potential of your business with Merchant West’s Invoice Discounting Solutions. Contact Merchant West today to discover how our finance solutions can drive your business forward. Let us be your trusted partner in growth and success.
Frequently Asked Questions
It is a financial arrangement where businesses use their unpaid invoices to secure early payment from a finance company. This allows businesses to receive immediate cash, improving cash flow without waiting for customers to pay their invoices within the standard terms.
The process of invoice discounting involves several steps:
- Issuing Invoices: Your business provides goods or services and issues invoices to customers with typical payment terms of 30 to 90 days.
- Selling the Invoice: Instead of waiting for payment, you sell the invoice to a finance company at a discounted rate.
- Receiving Immediate Cash: The finance company advances a large portion of the invoice value, usually 80-90%, to your business.
- Invoice Collection: Your customer pays the invoice amount as usual, directly to you.
- Final Settlement: Once the invoice is paid, you receive the remaining balance from the finance company, minus any service fees.
This is a type of invoice discounting where the arrangement between your business and the finance company remains undisclosed to your customers. You continue to manage your sales ledger and collect payments from your customers as usual. Customers are unaware that their invoices have been sold to a third party, maintaining the confidentiality of your financing method.
When businesses:
- Have long payment terms and need to bridge gaps in cash flow.
- Are experiencing rapid growth or seasonal fluctuations affecting their cash flow.
- Prefer to maintain control over their customer relationships and manage their sales ledger directly.
Get in touch with us
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Invoice Discounting
Invoice Discounting
