Invoice discounting is a form of alternative finance in which business owners have an agreement to sell their unpaid invoices to a third party. Therefore, businesses will gain all access to the money in advance, thus, unlocking the cash flow to their business.
Benefits
Fast access to finance.- There is no need to inform clients of using an invoice finance loan provider which keeps confidence with the customer and business as well as the business remaining in control of collecting payments and maintaining relationships.
- With invoice discounting you only pay interest on the money that you borrow.
Limitations
- Due to the loan being short-term, it usually comes with higher costs and fees.
- Invoice discounting is generally for businesses with a considerable turnover. This finance solution may not be suitable for smaller businesses due to difficulties involved with finding lenders who are willing to accept.
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