Whether you are closing down one business and looking to finance another, possibly as part of a pre-pack administration or liquidation, or if you want to realise the assets such as invoices to create cash flows, then invoice discounting may be for you.
Invoice Discounting Explained
For many small businesses seeking to raise instant funds for working capital, Invoice Discounting may be the answer. It is similar to factoring in its aims but very different in practice. There are two types available, called Confidential and Disclosed. As their names suggest, with Confidential the customers are unaware of the Discounter’s involvement, whereas where it is Disclosed they are. The invoice discounting procedure, in brief, is as follows:
• Client sends customer’s invoices for work completed
• Client sends day sales ledger to Discounter
• Discounter pays up to 85% of invoice values to client
• Client collects payment from customer and banks these into a designated account
• Discounter collects funds from account and releases the 15% balance still retained less his charges.
For many new businesses there will be an existing ledger available and the Discounter will be able to release those funds which qualify to the client.
Invoice Discounting Costs
Invoice discounting costs consist usually of a service fee which can be between 0.1% and 1% of turnover. The Cost of money which is the interest charge over base for the advanced money is a second charge. In addition there will also, in a majority of cases, be a minimum annual charge.If you have a need for finance, it is highly likely that if you have assets of any description, we can help you obtain the borrowing you need.
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