The roots of the facility lie with Factoring in as much as the facility is cash flow linked to outstanding sales invoices. The difference to Factoring lies in customer awareness. With a Factoring facility every invoice must have an assignment to the Factor. This is in the form of a stamp telling the customer that the invoice has been assigned to the Factor, and payment must be made to them. Invoice Discounting is confidential so there is no such disclosure.
Your business is responsible for ledger management including collections. Instead of supplying copy invoices as would be done with Factoring you supply the Invoice Discounting company with a schedule of invoices raised. Do this in a time scale that suits. Funds are then made available with up to 85% typical. As you are responsible for collections payment will be made to you and it is imperative funds received are banked to the account of the Invoice Discounter.
It should be a simple facility to operate but it's important you source the right provider. There are variations in security wanted (particularly with Personal Guarantees) and, of course, rates. So it is worth shopping around and an experienced, independent commercial finance broker like us will help.
If a lack of operating capital is at the heart of your financial trouble, we can quickly determine which solution best suits your needs.