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Financial calculation for selective invoice discounting

Definition of Selective Invoice Discounting

“Selective Invoice Discounting is a means of raising working capital by selling selected invoices to a third party finance provider, in exchange for immediate release of funds.”

Invoice Discounting is a great way to free up working capital instantly, but some companies are concerned about committing their whole sales ledger to the process and would prefer to just use one or two invoices, as and when they need, to speed up their cashflow.

If that’s how you feel, then selective invoice discounting could be a convenient way of unlocking the value of your invoices. With selective invoice discounting, you can choose which invoices you want to send to us – maybe because you need cash quickly to snap up stock, act on a marketing opportunity or just for a quick boost of working capital.

How does selective invoice discounting work?

You choose which invoices to discount – perhaps because you have hit a lull in trading and need some additional working capital, or even because an opportunity has come up that is too good to miss but you need cash quickly to snap it up.

You send us the invoice or invoices that you wish to discount, after you have sent a copy to the customer, and we will pay you up to 90% of the value of the invoice.  It is worth remembering that a lender will normally want to ensure that you have adequate credit collection processes in place, and may want to ensure that you have Bad Debt Protection Cover in place in the event that your client doesn’t settle their invoice, as you will remain responsible for the invoice if your client doesn’t pay. The lender may also make an assessment of your customer’s ability to pay before paying out on the invoice. When the customer has settled the invoice, you send us the advance that we paid, along with a small percentage fee. As you retain control of chasing and issuing invoices, selective invoice discounting can be confidential and your customers can remain unaware of any third party involvement.

Will selective invoice discounting work for me?

Selective invoice discounting is particularly effective for companies whose business flows in seasonal cycles because during the lean times you can use selective invoice discounting to speed up your cash flow but during fast trading periods you don’t need the service.

Selective invoice discounting can work for most sectors though, as it is a fast, flexible way to get cash quicker without impacting on the payment terms you have agreed with your clients. Selective invoice discounting is usually offered on a revolving credit facility so that when one invoice is settled, more credit becomes available, subject to your customer meeting lender’s assessment criteria.

Selective invoice discounting is a flexible way to free up working capital during quiet times, without using your entire sales ledger. Some of the sectors we have found selective invoice discounting solutions for include:

  • Selective invoice discounting for manufacturing

To find out how selective invoice discounting could help you control your cash flow, even during seasonal dips, speak to us today.

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