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Sources of Finance

Invoice Discounting

Invoice discounting enables you to retain the control and confidentiality of your own sales ledger operations.

The client company collects its own debts. 'Confidential invoice discounting' ensures that customers do not know you are using invoice discounting as the client company sends out invoices and statements as usual. The invoice discounter makes a proportion of the invoice available to you once it receives a copy of an invoice sent.

Once the client receives payment, it must deposit the funds in a bank account controlled by the invoice discounter. The invoice discounter will then pay the remainder of the invoice, less any charges.

The requirements are more stringent than for factoring. Different invoice discounters will impose different requirements. Typically, the client company:

• Must have an annual turnover of at least £500,000.
• Be subject to an audit by the factor, usually every three months, to check that credit control procedures are adequate.
• Must have a minimum net worth of at least £30,000.
• Must be profitable.

The requirements for 'disclosed' (i.e. non-confidential) invoice discounting are generally less demanding.

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