What is confidential invoice discounting?

What is confidential invoice discounting and, why is it an important facility for small businesses? Good question!  The finance industry is rife with jargon, and our corner of the finance market is no different. To help you evaluate if confidential invoice discounting is the right way to go, let’s break it down into straightforward terms.

Confidential invoice discounting is what it sounds like; finance that your customers aren’t aware of. That can be important in certain industries or if you’re concerned about your customers being contacted by a third party.

What is invoice discounting?

Invoice discounting is a financial instrument that enables you to borrow money against your unpaid invoices. The process entails an invoice being sold or assigned to the finance company who then provide an amount equal to an agreed percentage of the gross value of the invoice immediately, providing easy access to cash without having to wait until the payment date has come due and payment eventually received. You receive upfront cash in advance of your invoice being settled, and then repay the advance when your customer pays.

What is the difference between factoring and invoice discounting?

Whilst essentially operating in the same manner, factoring and invoice discounting differ in the level of service provided.

With factoring, full outsource credit control is part of the package. With invoice discounting, you retain control of and responsibility for your sales ledger.

What is the difference between disclosed and confidential invoice discounting?

It’s all about discretion. Both disclosed and confidential invoice discounting, are operated in the same way but with disclosed discounting the connection between the lender and business is not hidden. A notice of assignment is included on your invoices detailing the discounter’s involvement and often confirmatory monthly statements are sent to your clients. A confidential invoice discounting has no external notice of your funding arrangements. This inherently carries more risk to the financier and, the facility is therefore usually only made available to companies with an excellent track record of credit control, debtor repayments and healthy business history.

What are the benefits of invoice discounting?

Every business owner knows the importance of cash flow. Whether you’re a start-up or an established company, without sufficient funds to meet your day-to-day expenses and payroll, it can be difficult to ensure that your operations run smoothly. Fortunately, there are many ways businesses owners can get their hands on some much-needed cash.

Invoice discounting is a great option. It’s a process that can help businesses obtain a significant upfront payment based on the total value of their outstanding ledger and ongoing within 48 hours as further invoices are raised.

If you’d like to know more about our discreet discounting facility or have any questions about invoice finance in general, please get in touch.