Invoice Discounting: The Best Way to Get Funding for Your Business

Invoice discounting may be the ideal way to get it if you're looking for financing for your business. What is invoice discounting? An invoice finance company lends you money so that you can pay your suppliers or other service providers on time. This lets you avoid late fees and penalties from those vendors and keep them happy with prompt payment—which is also essential for a good reputation with suppliers.


What Is Invoice Discounting?

Invoice discounting is a way to get funding for your business. It’s a form of factoring that allows you to sell an invoice at a discounted rate before receiving payment from the customer. That money is then used as collateral to secure funds from your invoice lender and is paid out by them after they receive payment from the customer. A typical example would be if you had £1,000 worth of outstanding invoices and could obtain an advance based on this sum for two or three months ahead, so long as it was less than 90% of their value (so in this case around £900). The money would then be paid out once all involved parties had been paid in full – including yourself!

How Does Invoice Discounting Work?

Invoice discounting is a form of financing. It’s also a way to get funding for your business quickly, without collateral.

How does invoice discounting work?

Invoice discounting allows businesses to borrow money by selling invoices representing future income. The lender buys the invoice at a discounted rate, which is determined by how much time there is until the invoice will be due and what percentage of your accounts receivable can be collected by then. The lender will then collect the amount due on the invoice by deducting it from your bank account, or they can wait until you receive payment and then collect their money back. For example, if you sell an invoice for $1 million but only have $700,000 worth of cash flow to cover it, a discounting company would buy that invoice for less than full value.