Invoice Discounting to release cash into your business

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Invoice
Discounting

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What is invoice discounting?

Invoice discounting is where a business receives a percentage of an unpaid invoice in advance, rather than waiting for 30+ days for the customer to pay the invoice. An invoice discounting facility provides the business with a percentage of the unpaid invoice upfront.

Once the total invoice is paid by the customer, the lender will take a fee from the remaining invoice amount. Invoice discounting is a form of short term business finance, which is used by businesses that use customer invoicing as their primary source of revenue. Businesses will have to sell the entire amount of unpaid invoices from the sales ledger to the invoice discounting company.

Invoice financing is sometimes known as ‘accounts receivable funding’.

invoice discounting

How does invoice discounting work?

Below is a simple example/case study of how invoice discounting generally works:

A business owner submits an invoice of £1,000 to a customer for a piece of completed work. However, the business owner needs money now to pay an upcoming bill, but the customer will not pay for the invoice until it is close to the deadline which is 30 days away.

The business owner uses an invoice discounting company, which agrees to provide the business with 75% of the unpaid invoice on the condition that they receive a fee. The business receives £750 in advance and the business owner uses the £750 to pay their bill. 

30-days later, the customer pays the outstanding invoice accordingly, into an account that is overseen by the invoice discounting company. Next, the invoice discounting company repays the business owner’s remaining £250, minus the fees.

What can invoice discounting be used for?

Invoice discounting is flexible and can be used for anything. Generally, it is used by businesses to sustain cash flow to ensure the business can run effectively. Other times it may be used to invest within the business, such as training staff or paying for new equipment.

In some cases, invoice discounting may be utilised to deal with unexpected payment, as it allows businesses to receive the money they have tied up in unpaid invoices.

Why do businesses apply for invoice discounting?

Businesses apply for invoice discounting because they need the money instantly, but it may take 30 or 60 days for customers to pay the invoice. Invoice discounting lets businesses access the money tied up in unpaid invoices quickly.

Often the money a business receives from invoice financing can be injected back into the business to provide a boost to cash flow and working capital. Other times it may be used to pay upcoming bills, payment deadlines, or to pay staff on time.  

It’s a very simple and flexible funding solution, which makes it very popular with a variety of businesses.

What businesses apply for invoice discounting?

Any business from any industry can apply for invoice discounting, as long as the business uses invoices. You will often find that new businesses that are growing quickly will apply for invoice discounting to cover the early costs of running a business. 

Seasonal businesses may also find themselves utilising invoice discounting, to help maintain cash flow during quiet periods of trading.


What types of invoice finance are there?

Besides invoice discounting, there are several invoice financing options available which are provided by invoice finance companies.

Invoice factoring

Invoice factoring is a form of invoice finance, which lets businesses sell their unpaid invoices to an invoice factoring company and in return receive a percentage of the total invoice upfront. 

The invoice factoring company will then take charge of collecting the payments and ensuring that the customer pays the unpaid invoice on time. The customer will deal with the invoice factoring company first hand. The invoice factoring company will then charge a fee (which will be taken as a percentage of the total invoice).

Selective invoice finance

With invoice discounting and factoring, the credit terms often mean that they will take care and provide money across all unpaid invoices on the sales ledger. Selective invoice financing allows businesses to pick and choose which unpaid invoices they would like to advance.

Invoice discounting vs invoice factoring

The main difference between invoice factoring and discounting is that the invoice factoring the credit company is far more involved in the credit control processes. With invoice factoring, your customers will be alerted that you are using an invoice factoring company to collect invoice payments.

Invoice discounting lets businesses have much more control over the lending business, rather than leaving it to a credit company. Therefore, the business is responsible for ensuring their clients pay on time. As the business is in control, the customer does not know that there is a third party involved, this is known as confidential invoice discounting.

They are both similar to the extent that the business will have to sell all unpaid invoices to the invoice financing companies.


What are the benefits of invoice discounting?

  • Funds can be used for any business purpose.
  • Applications turned around within 24 hours.
  • The funder can takeover invoicing function in some cases.
  • Can borrow up to 95% of the total invoice value.
  • Completely separate from banking facilities.

How can I apply for invoice discounting?

To apply for invoice discounting you can speak to one of our account managers on the phone by calling 01244 207276. Our account managers are happy to answer any questions you have regarding invoice financing and how it would work for your business. 

Alternatively, you can complete the online quote box which can be found at the bottom of the page. Once you complete the online form, one of our account managers will be in contact to discuss the finance you’re looking to apply for.

How long does it take to process invoice discounting applications?

Applications for invoice financing can be turned around within 24 hours. However, this depends on the point of application as well as other terms and conditions that may need to be fulfilled.


Why choose JPM Capital for invoice discounting?

JPM has partnered with the UK’s leading Invoice Finance specialists. This product bridges the gap between the point at which you make a sale and the time payment is released. Our finance partners can release a pre-arranged percentage of the value of your sales ledger, on an ongoing basis.

Releasing valuable working capital can help your business grow. This product is particularly an attractive option for businesses that are growing quickly or those that are affected by seasonality.

If your business already uses Invoice Financing, please speak to us to explore if our partners could offer improved terms for your business.

What other financial products can JPM Capital broker?

JPM Capital works with a number of different partners which allows us to broker a variety of financial products to businesses in the UK. Other products that we can broker include:

To contact us about any of our funding options listed above, please call us at 01244 207276 or by filling out the quote form at the bottom of the page.

Paul is calm, thoughtful and positive during a period where so many businesses are in panic. I am thankful for his and JPM's continued support and will continue to recommend clients in need to Paul.
Accountants - Glasgow
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