Confidential Invoice Discounting
Confidential invoice discounting can be an excellent source of working capital for your business. At the outset it can provide a valuable cash injection to your business and on an ongoing basis it can smooth your cash flow and remove the concerns surrounding late payment.
What is confidential invoice discounting?
Confidential invoice discounting is a form of invoice finance where an invoice finance company simply lends money against outstanding invoices. As the name suggests the facility is confidential and it provides only finance so there are no additional outsourced services such as credit control. If you’re not looking for a confidential service, visit our invoice discounting page.
How can confidential invoice discounting help my business?
If you are a business selling to other businesses on credit terms you may have a lot of cash tied up in your debtor book. Growing businesses in particular can find this restrictive as there is not enough cash to pay wages and suppliers. If cash is tight late payment from your customers can cause serious cash flow issues. An invoice discounting facility will release up to 90% of the value tied up in your unpaid invoices. This means that as invoices are raised cash can be released to make those essential payments that you worry about.
As the name suggests this type of facility is confidential so your customers are unaware that your invoices are being financed. This can be especially useful for sensitive industries or just for sensitive customers.
A well structured confidential invoice discounting facility will help your business grow and prosper.
How does confidential invoice discounting work?
At the outset of the facility the agreed prepayment percentage will be applied to the eligible debts in your debtor book. Thereafter as you raise invoices you simply notify the lender of the total amount of the batch of invoices you have raised. They will make available to your business up to 90% of the gross value of those invoices the next working day. From there you can draw funds down from that availability as you need it. Your business does it’s own credit control and your customers are unaware of the lenders facility.
How much does it cost?
For a bespoke quotation please use our free quotation tool that will take into account the unique variable of your business.
A confidential invoice discounting facility attracts two main fees, namely the service fee and discounting fee.
The service fee is a percentage fee that is applied to the gross value of each invoice notified to the lender. For example a business with a turnover of £1m + VAT can expect a service charge of between 0.60% and 1.00%. Turnover is a key variable and typically the higher the turnover the lower the percentage fee.
The discounting fee can be equated to the interest rate on an overdraft facility. It is charged on the actual amount that you borrow. Usually the discounting fee on a confidential invoice discounting facility will be quoted as a percentage of a base rate. For example 3.50% over bank base rate or 3 month LIBOR.
Different lenders do however have different charging structures and the headline rates of the service fee and discounting fee can be misleading. When comparing different quotes for invoice discounting we consider total costs and take into account all the additional charges. This is important and our market knowledge allows us to do this quickly and accurately.