Both the terms, invoice factoring and invoice discounting, help ambitious companies to expand and grow their businesses to the new heights. They refer to the same essential process which asset-based working capital solution which allows businesses to get the advances on cash due from the customer, instead of waiting for those customers to pay. Thereafter, the businesses can invest in their growth.
Invoice Discounting Company plays a major role of working capital finance since the restriction of bank financing, credit crunch as a result. Invoice financing is way more attractive to a bank as it relies on the collateral of the invoice which is due from the debtor. New, Post-credit crunch bank capital regulations have resulted in banks transitioning companies away from the unsecured overdrafts and loans and on to this mode of lending.
Types Of Invoice Financing
- The first one is confidential invoice discounting in which invoice financing can be arranged confidentially so that the suppliers and customers are unaware that the business is being advanced.
- Then comes the Invoice Discounting Funding Limits, in which many companies do not estimate individual debtors of the business by utilizing invoice discounting. But it is to protect themselves against the insolvency of debtors by trusting on the business having a myriad number of customers.
- Next is Selecting Invoice Discounting which works like spot factoring. It is where single receivables are sold to a third party. Factoring facilities are traditionally whole-turnover through which the whole sales ledger of a company must flow.
- Another one is Whole Turnover Invoice Discounting in which every invoice has to be sold in a whole turnover facility, different from the need.
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