Invoice finance
Invoice Discounting for UK Businesses
Invoice discounting lets a business draw funds against the invoices it has sent to business customers, while usually carrying on collecting payment itself. Because you stay in charge of your customer relationships, the arrangement is usually confidential.
It’s one of the two main types of Invoice Finance. It tends to suit businesses that already run their own credit control and want to keep doing so.
Wize Finance can help your business see whether invoice discounting, or another type of finance, may suit the invoices you’re waiting on.
Tell us roughly how much you invoice each month and who your customers are. The team reviews your enquiry and discusses whether discounting may suit.
What is invoice discounting?
Invoice discounting is a type of invoice finance where a business borrows against its unpaid invoices. The provider advances an agreed portion of their value. The business usually keeps managing its sales ledger and collecting payment, and the facility is repaid as customers pay.
The name comes from the provider’s charge: you receive the value of your invoices, less a “discount” that covers the cost of the funding.
You receive
the value of your invoices less a discount
How invoice discounting works
The reporting routine, account set-up and how funds are drawn all depend on the provider and the facility.
What your customer usually sees
Usually unchanged for your customer
- you deliver
- you invoice
- you chase, if needed
- they pay you, as normal.
What happens behind the scenes
- You share details of your invoices or sales ledger with the provider, typically on a regular basis.
- The provider advances an agreed portion against eligible invoices.
- Customer payments are typically paid into an account the provider controls, which may look to the customer like your own business account.
- As payments come in, the advance is reduced and the remaining balance, less fees, is released to you.
You keep control of collections
With invoice discounting, your business usually stays responsible for:
-
sending invoices and statements
-
chasing overdue payments
-
handling customer queries and disputes
That means you keep your existing customer relationships and processes.
It also means providers will usually want confidence that your credit control works well, which is why invoice discounting tends to suit more established businesses. If your business is earlier on, factoring or another type of invoice finance may be worth looking at.
Confidential and disclosed invoice discounting
- Confidential
Invoice discounting is usually confidential: your customers deal with you as normal and aren’t told about the arrangement. This is often called confidential invoice discounting (CID).
- Disclosed
Some facilities are disclosed, meaning customers are made aware, for example where a provider’s criteria require it. Check which applies before you agree a facility, and whether that could change.
Tell us what you need.
What providers may look for
Because you keep collecting payments, providers may look closely at how your business manages its sales ledger.
They may look at:
- your credit control processes and how promptly customers pay
- the quality and spread of your customers
- your accounting systems and how easily you can report on invoices
- your trading history, turnover and accounts
- existing borrowing and security, and the directors’ credit history
If you’d prefer the provider to handle collections, Invoice Factoring is usually the closer fit. The Invoice Finance guide compares the two.
When invoice discounting may fit
May fit businesses that:
- invoice other businesses on credit terms
- already run effective credit control
- want customers to keep dealing with them directly
- can report regularly on invoices and payments
May fit less well where:
- you’d value help chasing payments (factoring usually includes this)
- you’re early in trading or don’t yet have established credit control
- your funding need isn’t linked to invoices (see Business Line of Credit for a reusable limit)
What to check before you agree
Invoice discounting FAQs
What is confidential invoice discounting?
It’s invoice discounting where your customers aren’t told about the arrangement. You keep invoicing and collecting as normal, and the provider stays in the background. Most invoice discounting is confidential, but not all of it.
What’s the difference between invoice discounting and factoring?
The main difference is who collects payment. With invoice discounting you usually collect it yourself; with factoring the provider usually does. Our invoice finance guide compares them side by side.
Do I have to report to the provider?
Usually, yes. Providers typically ask for regular updates on your invoices and the payments you’ve received, so they can track what’s eligible for funding. How often, and in what form, depends on the facility.
Why is it called discounting?
Because you receive the value of your invoices less a discount: the provider’s charge for advancing the money before your customers pay.
Is invoice discounting suitable for a new business?
It can be harder for newer businesses, because providers usually want confidence in your credit control and track record. Requirements vary, so Wize Finance can talk through whether discounting, factoring or another type of Invoice Finance may suit where your business is now.
Want funds against your invoices without changing how you collect?
Tell us about your customers, your payment terms and how you manage collections today. Wize Finance can then help you see whether invoice discounting or another type of finance may suit your business.
- your customers
- your payment terms
- how you manage collections