Invoice discounting is often preferred by more established businesses with robust credit controls in place. Invoice discounting involves a business using its unpaid invoices as collateral to secure a line of credit from a lender. The business retains control over its sales ledger and is responsible for collecting payments from their customers. The lender advances a percentage of the invoice value, typically 85%-90%, with the remainder, minus a fee, paid when the customer settles the invoice. This method is usually confidential, meaning your customers will not be made aware of the arrangement.
Invoice discounting is often preferred by businesses that wish to maintain direct relationships with their customers and handle their own collections.
As with Invoice Factoring, the funder will take out a legal charge known as a debenture against your invoices, allowing them to collect their money in the unfortunate event your business ceases trading.