Invoice Discounting

Invoice Discounting is normally a bank product and not to be mistaken with Factoring.

It is widely used in more established businesses that have a collection department, or administrative section. These businesses also have no need for a financier to collect invoices on their behalf. Most businesses at this level don't need all invoices funded and often use it as an overdraft system for purchases of stock or wages.

Invoice Discounting lets you draw up to 80% against your ledger when required. It is not against individual invoices which sets it apart from factoring. This facility also gives you the ability to predetermine how much you want to draw down out of each ledger limiting interest costs.

Once the debtors pay for invoices, the financier releases the final 20% less fees the next day into your business account. In most cases financiers have almost paperless procedures with a very simple on line system.

Banks often make this facility undisclosed / confidential to the debtors. If the accounts are well maintained only the lender and the financier are aware of this product occurring.

If Invoice Discounting is what your business needs for cashflow, contact TDFC, and let a consultant discuss with you, pricing and lenders to suit your business needs.

We offer advice about Factoring, Debtor Finance, and Trade Debtor Finance.

Invoice Discounting explained.

Invoice Discounting is normally a bank product and not to be mistaken with Factoring.

It is widely used in more established businesses that have a collection department, or administration section. These businesses also have no need for a financier to collect invoices on their behalf.

Most businesses at this level don't need all invoices funded and often use it as an overdraft system for purchases of stock or wages.

Discounting lets you draw up to 80% of your invoices when required. It also gives you the ability to predetermine how much you want to draw down, limiting interest costs. Once debtors pay for invoices, the financier releases the final 20% less fees the next day into your bank. In most cases financiers have an almost paperless procedure with a very simple on line system.

Banks often make this facility undisclosed to the debtors. If the accounts are all well maintained only the lender and the financier are aware of this product occurring.

If Invoice Discounting is what your business needs for cashflow, contact TDFC and let a consultant discuss with you, pricing and lenders to suit your business needs.

Other products are Factoring, Debtor Finance, and Trade Debtor Finance.

Factoring & Debtor Finance explained.

Factoring is the oldest form of lending in the world. Clients conduct work or offer a service and with this finance facilty, get paid straight away instead of waiting 30 days or more. Today in the modern world more clients are on line and have email systems running making invoicing nearly paperless.

Factoring by explanation means you provide completed invoices into a financier and get paid a percentage of that invoice in 48 hours not 48 days. Not to be confused with invoice discounting.

This is how Debtor Finance works. You submit invoices and the lender verifies the work is complete, delivered etc. Once this has occurred you will be advanced up to 80% of the outstanding invoices into your bank account. This increases cashflow and gives your company the ability to purchase stock or pay bills ahead of schedule, possibly creating discounts and offsetting the finance cost.

Once the invoices are being paid for, your debtor will pay the full amount into the lenders account. The lender receipts the invoice, taking out amount borrowed plus a fee and gives you back your final 20%.

Example:

$1000.00 (Factored) you get $800.00 in 48 hours of verification. Debtor pays $1000.00 to lender and they take out $800.00. You get final final $200.00 less lender fee.

Factoring fees.

Most lenders vary slightly in fee setups. However Factoring normally involves a credit department, collection department, and some form of account management. This level of service isn't provided for nothing. Between 2-4% on average is the upfront fee charged on an invoice. This is sometimes called administration, service, or management fee. The secondary charge is interest. The amount you draw or borrow times by the number of days outstanding. Depending on the lender and its borrow costs from a bank, determines your interest rate charged.

TDFC consultants are fully aware of lenders rates and fee structures. If we don't know we find out. For a full explanation of Factoring give a TDFC consultant a call. TDFC stand by our service.