Invoice Discounting

Take control of your cashflow the confidential way.

  • Offer extended terms to clients
  • Improve cashflow
  • Trade efficiently

Invoice Finance

Step 1

You invoice your clients as normal and also send a copy of the invoice to the lender.

Step 2

You receive up to 90% of the gross invoice value straight away.

Step 2

You receive up to 90% of the gross invoice value straight away.

Step 3

You conduct the credit control and get the remaining 10% once your client pays.

Over

Companies in the UK
using Invoice Finance

Over

Billion invoices
funded in the UK

Over

Coffees consumed at
Contact Business Finance

What is Invoice Discounting?

Invoice discounting is also known as confidential invoice discounting or CID. Like all facilities associated with invoice finance, invoice discounting allows you to release cash from outstanding invoices. However, this facility remains confidential and your clients do not have to know that you have a facility. Credit control is conducted by your business and a lender’s notice of assignment does not appear on your invoices.

How does Invoice Discounting work?

Invoice discounting allows you to release up to 90% of the gross invoice value, the same day you raise the invoice. Having an invoice discounting facility with the right lender can work for businesses that are cash hungry but do not want clients to know that they have such financial support from a lender. The process is simple:

  1. You send your invoices to your clients as normal and forward a copy to an invoice finance lender
  2. They release up to 90% of the gross invoice value straight away
  3. Your business then conducts credit control and chases clients for when payments are due
  4. The remaining 10% is made payable to your business once your client pays, minus the lenders charges which are typically 1-2%

Example

Invoice Value £1,000 £5,000 £10,000
Cash from the lender on day one (90%) £900 £4,500 £9,000
Cash from the lender once client pays (10% minus fees) £90 £450 £900
Lenders fee (based on 1%) £10 £50 £100

How much does Invoice Discounting cost?

Confidential invoice discounting is generally more competitive than other forms of invoice finance facilities. The service charge is generally less because you are not having to pay for the lender to assist with credit control and chase clients for payment.

What are the advantages of Invoice Discounting?

Improves your cash flow – invoice discounting allows you to grow your business by simply getting paid quicker. This allows your business to have a steady cashflow, not have to wait for clients to pay on time and trade efficiently.

Confidential – this means that your clients do not have to be aware that you have the financial backing of a lender. Some business owners prefer this.

Potential discount from suppliers – invoice discounting can sometimes pay for itself. This is because a business can now afford to pay suppliers sooner and potentially negotiate a discount from them.

Safe way to borrow – as your business grows, so does your funding. Unlike a traditional loan, you can only borrow against cash that you are already owed by clients. Therefore, there is no risk of falling behind on payments.

Release up to 90% of the invoice value – this is not only for future invoices, but you can also drawdown against your existing sales ledger, as long as the invoices are not older than 90 days.

Speed – you can release cash from an outstanding invoice on the same day. Therefore, you no longer have to wait for clients to pay and you can trade more efficiently.

What are the disadvantages of Invoice Discounting?

More admin – you must conduct credit control in house and lenders quite often need management accounts to be produced on a monthly / quarterly basis. This is because there is less transparency associated with this form of invoice finance facility.

Debenture search – if your clients wanted to search, they could still see if a lender has registered a debenture charge on companies house.

Terminology – not all lenders use the same terminology and call it invoice discounting. It is quite often referred to as a CID facility which is just an abbreviation of ‘Confidential Invoice Discounting’. We can help clients understand a lot of the terminology.

Is Invoice Discounting a good idea for my business?

Confidential invoice discounting can be great for a business that needs a steady cashflow. It allows businesses to have that constant working capital required to trade efficiently. Invoice discounting is generally for bigger businesses who have systems in place to conduct credit control and are able to produce management accounts on a lenders request.

What is the difference between Invoice Discounting and Invoice Factoring?

Invoice discounting is confidential, and you keep credit control in house. Invoice Factoring Facility is fully disclosed, and the lender assists with credit control and often speaks to clients.