Invoice discounting is usually used by companies that are larger than those that use factoring. Discounting helps you keep control and confidentiality over your own sales ledger operations.

Whole invoice discounting and selective invoice discounting products are usually available, however many of the traditional factors don’t allow business to get finance against their entire sales ledger.

• You provide the goods/services to your customer and invoice them
• You send the invoice details to the invoice finance provider
• A percentage of the face value of the invoice is paid to you, usually within 48 hours (different factoring companies will advance different percentages depending on their own risk criteria)
• Depending on the type of invoice finance, either you carry out payment chasing as normal or the invoice finance provider will take control of this part of your client relationship for you
• When your debtor pays, the remainder of the invoice that you didn’t receive earlier is paid back to you – less a service fee

• Quick cash
• Releases locked cash
• Reduced collection period
• Improves cash flow
• Control over the ledger 
• Confidentiality

With so many alternative finance options now available, it can be difficult to know which one is the most appropriate, but invoice discounting could be a good option if:

• Your credit control procedures are robust, and known to be effective
• You have minimal bad debts
• Your customers pay on time in the main
• Customers have a minimum of 30 days in which to pay
• You meet the minimum level of turnover required by the lender

One of the main considerations when deciding on an invoice finance facility is whether you carry out credit management processes in-house. If not, invoice factoring may be more suitable.

Discounting services are generally more widely available to established businesses rather than start-ups which, by their nature, would not have reliable turnover and credit management processes.