Benefits of Invoice Discounting to Businesses
Invoice discounting | availability of fast cash
Most discounters give businesses the needed money, against their sales invoices, in less than 24 hours. Given that some of the amounts might be hundreds of thousands of Pounds, this is perhaps the fastest source of funds compared to other sources (banks, payday lenders, financial institutions and customer payments). Businesses can use the funds to improve their cash flow, as well as ingest the funds into some profitable urgent opportunities, which may not wait until customers pay the invoices or other funding sources grant the business money.
Invoice discounting allows businesses to get the funds they need fast, without their customers knowing of the arrangements. This anonymity protects the business from losing its customers if they should find out of the supposedly financial crisis of the business and lose their trust in the business. Since the business continues sending invoices and collecting payments as usual, the customers do not get harassed by the discounter, and it is, thus, a win-win situation for both the business and the customers. A business does not need to make any major changes to its systems to get funding through invoice discounting.
The availability of fast cash enables a business to have the cash it needs to run other affairs, and it can, therefore, grant some of its customers extended payments. This can increase the base of customers that the business accommodates, hence might lead to the growth of that business. Additionally, existing customers may find the extended payment terms convenient, thereby increasing their transactions with the business.
Bad debt protection
Some invoice discounters give businesses bad debt protection. A bad debt protection agreement guarantees a business 100 percent payment of an invoice, by the discounter, if the invoice holder does not make payments, for whatever reason. This arrangement must follow that the business did everything possible to collect a debt, but the debtor failed to make payments. For businesses, bad debt protection is the icing on the cake of invoice discounting, as not only does the business get the funds it requires fast, but also hedges against failed payments.
Funding grows with business
Bank overdrafts, loans and other forms of funding require intensive and regular update of the lending terms, but invoice discounting is different. With invoice discounting, funding increases as the business grows. While discounters stick to the percentages of the invoices they can pay a business, an increase in the amount of sales invoices automatically increases the amount the business can get in advance.
Invoice discounting is a fast, hassle free and reliable form of business financing. Businesses increase their cash flow, as well as get funds to invest in beneficial opportunities, by selling their sales invoices to financial and other institutions that buy them at a fee. The anonymity, speed and convenience, which invoice discounting offers businesses, comprise some of the reasons why businesses opt for this financing option.
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