• Cheaper Alternatives To Invoice Discounting

    We explain some cheaper alternatives to using invoice discounting.

    If you are looking for cheaper alternatives to invoice discounting, we have a few options below.

    For support please call Sean on: 03330 113622.

    Explaining Invoice Discounting

    First let's start by explaining invoice discounting and how it works. Invoice discounting is a business financing service for companies that sell to other businesses, on credit terms. It can assist where you are selling services, or tangible products. The issue it solves is that when you offer customers credit, you don't get paid for a number of days following delivery of the goods or services. You may even have to pay for supplies, staff costs and other expenses in that time period, before you get paid. This creates a cash flow gap.

    Invoice discounting bridges the cash flow gap by releasing prepayments against your unpaid invoices (or applications for payment in the construction sector). This will typically be c. 85% of the value of the invoices. You get the balance when the customers pays, less the fee for using the service.

    Cheaper Alternatives To Invoice Discounting

    Below we explain some of the alternatives to invoice discounting, that may be cheaper. You will need to get quotations for your particular situation in order to be sure about how the costing will compare.

    Don't Borrow

    The cheapest option is of course not to borrow anything, but the cash flow gap is often the issue. You may think, OK well I can use my personal funds - but how much is that going to cost? If you are using credit cards or expensive personal loans, the price of borrowing can be very high.

    Choose A Cheaper Discounter

    The price of all invoice discounting (ID) facilities is not the same. We did a study of the pricing of a number of providers of confidential invoice discounting, and we found an 86% cost differential between the cheapest and the most expensive quotes. This means that you could get some price quotes and see if you can get the same product cheaper, somewhere else.

    What About A Disclosed Invoice Discounting Facility?

    Have you considered disclosed ID (DID) instead of confidential ID (CID)? Some providers charge a premium for confidential facilities, as they present them with additional risk (the debtors are unaware of the funders involvement). You could get a quote for a disclosed facility, where your customers are aware of the relationship with the finance company. The operation and the funding is normally similar, but you may get a cheaper price.

    Consider A Selective Product

    Have you considered a selective service? If you use selective invoice discounting, you only get funding against invoices you choose rather than all your sales. In some circumstances, this can help control the cost e.g. if you don't need to finance all your invoices.

    Look Into Factoring

    Have you looked into factoring? The difference with a factoring facility is that you get a credit control service, in addition to the prepayments. Now you might expect this to be more expensive, however in some circumstances it can work out cheaper. The reasons is that premium that is sometimes charged for confidential services. With factoring the funder undertakes the credit control, so in addition to delivering a service to you, they feel they are in a much better risk situation as they are in contact with your debtors. This can lead to a cheaper price in some circumstances. Also, the additional benefit of not having to do the credit control yourself, can present another cost saving in some cases.

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Examples of just a few of our finance partners:

pulse cashflow finance
woodsford tradebridge