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Invoice Discounting. SME Finance

Invoice Discounting

Invoice Discounting is a great product for a well-developed SME and even many large businesses, that have the opportunity to expand if capital can be released from its Balance Sheet.

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Invoice discounting is an alternative way for businesses to draw money against their invoices that have not been yet been paid, however, the business retains control over the administration of the sales ledger and relationship with the Customer. It can provide a cost-effective way for businesses to improve their cash flow and expand their business.

Invoice discounting is only available to businesses that are well established and with a solid Balance Sheet

The business needs well developed accounting systems

The customer pays a small management fee per invoice, and also pays interest on the amount drawn, just like an overdraft.

On receipt of the invoices, funds are made available at the agreed percentage rate, usually 80 per cent. This can be drawn by the client as required. As cash is received from debtors it is paid to a specific bank account, reducing the outstanding balance and generating cash availability to the client for the 20 per cent previously undrawn; it all runs a bit like an overdraft.

Notifications of further invoices will generate further availability – so the account balance will constantly fluctuate as invoices are assigned, funds are drawn and cash is received.

Features of invoice discounting

· The Client collect the debts and do the credit control.

· The Clients customers do not usually know about the invoice discounting, (even the existence of the lender) although it is sometimes disclosed.

· It is best suited for mature or well developed businesses and there are strict rules regarding the quality of sales ledger systems and procedures.

· There are regular checks or audits to confirm that your procedures are effective.

Visit www.nbf.com.au

For more information contact jeremy@nbf.com.au

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