5 Key Benefits of Invoice Discounting for Businesses

Invoice-Discounting

There are plenty of funding options available in the market today but there is a reason why business owners prefer invoice discounting over others. Considered as one of the most convenient and easiest forms of borrowing, it allows quick access to funds and you can use it for any business purposes. If you own a business and sell products on credit or offer services on credit, invoice discounting will be an ideal choice for you. Let us discuss the key benefits of invoice discounting for the business.

1. Instant cash: You can get quick access to cash with invoice discounting. The process is faster and quicker as compared to any other loan product. When you apply for a loan, you have to fill up the application form, submit the documents and wait for an approval. The lenders will take a lot of time in credit appraisal. Instead, discounting the invoice will give access to immediate cash. It will accelerate the cash inflow by converting the sales receivables into cash. You can use this cash in purchasing new raw material, hiring personnel, repaying debt, etc.

2. Release of locked cash: When you use an invoice to get funds, you are only releasing the cash that has been locked in the customer invoices for a long period. This form of borrowing simply coverts the account receivable of the company into cash. It is ideal in case of emergencies.

3. Better cash flow: Cash is the lifeblood of every business and funds can help improve the position of cash. You can improve the cash flow using invoice discounting as you can get an advance amount as high as 85% of the invoice value. If you have a short working capital cycle, it will be very beneficial for the business. Choose an invoice keeping its value in mind. If you need high amount, you need to choose an invoice that has a higher value.

4. Collateral free: You can get funds without using any assets as collateral. All you require are the invoices to which the customers are yet to pay. The lender will only need the invoices as collateral. There is no requirement to hypothecate any property, inventory or movable item. This makes release of the fund quick and hassle free.

5. Control: You have complete control on the sales receivables and you are free to manage the terms of credit, collect payments and negotiate the deals. Additionally, the lender will maintain complete confidentiality and the suppliers will not know about the borrowings of the company.

It can be rightly concluded that invoice discounting is a win-win for the business. You get quick access to cash and the customer gets the pre-defined credit period. You do not need to worry about going around looking for cash when you have the invoices with you. It also helps build a healthy relationship with the customers. These benefits outweigh any cons of invoice discounting and it can help a business grow manifold.
 

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