Invoice Discounting
Leverage the value of your sales ledger as collateral for a business loan
Gain access to cash tied up in unpaid invoices and tap into the value of your order book
GET ACCESS TO CASH FAST
Most SMME’s simply cannot afford to offer customers payment terms of 30 days or more, there is not enough liquidity to allow for this. If you have cash tied up in unpaid invoices affecting your cash flow, invoice discounting allows you to sell your unpaid invoices to private lenders for a cash advance that reflects a percentage of the invoice’s value. This is also often referred to as invoice factoring and invoice finance.
No more strain on small to medium businesses waiting for payments!
Invoice Discounting (sometimes also referred to as Invoice Factoring or Debtors Funding) is a bridging finance facility where money is advanced to you by ‘selling’ your future income to a bridging company, who then collects the debt on your behalf.
This process can take a few weeks, as the lender has to assess your business, your debtors and the risk elements of the bridging facility.
BENEFITS OF INVOICE FACTORING
- Increased sales and profits
- Access to cash to fund expansion
- Improved profit margins
- Improved credit rating
- Saving you time chasing debt yourself
- Protecting you from bad debt
- Discounts by having the buying power to purchase in bulk
- Early payment discounts by being able to play suppliers early
- Rainy day funds for emergencies
- Improve relationships with suppliers and customers
- Ability to develop new product lines
HOW INVOICE FACTORING WORKS
You will enter into a contract with the lender in which you will agree to factor sales that are due to be paid. You receive an order and complete the work/deliver the product. You raise an invoice and send it to the customer, sending a copy to the lender along with the original PO or estimate. You are advanced 75% of the invoice amount. The lender deals with the customer and requests them to settle. Once the customer has paid, you receive the balance of the invoice amount, less a small admin fee. The admin fee will be discussed and agreed upon before you enter into a contract.
Our professional credit controllers will manage your debtors for you, removing the time spent and stress over chasing payments from customers. If need be, we have the capacity to take legal action against non-payment.
Fact Sheet:
Risk: The lender ‘buys’ your debt and then collects the funds. If your client does not pay or does not pay on-time, then you are still responsible for the debt.
Requirements : The lender will want to see your audited financials (for 2 years) and up to date management accounts. Also all other statements of account e.g. debtors and creditors age analysis, assets register, contracts, leases, bank statements, stock lists and all other accounting records.
Time: The assessment process takes a minimum of 2 weeks.
Need cash while you wait for invoice factoring approval?
Apply for an unsecured business loan while you wait, unlocking R50k – R1.5 mil in cash within 3 days to help you manage your cash flow while we process your invoice discounting application.
Costs & Examples
Cost Structure
- Minimum Term – 3 months
- Maximum Term – 60 months
- Minimum APR – 15 %
- Maximum APR – 30 %
Example:
- Loan R 100 000
- Term 6 months
- APR 15 %
- Repayment R 115 000
A business starts an invoice discounting facility with a lender to help with cash flow. The agreement between the business and lender indicates that the advance percentage is 30%. The business completes a job and invoices their client for R10 000.
As per their invoice discounting agreement, the business will receive an advance percentage of 30%, so on this invoice the business will receive R3000.
When the client pays the R10 000 due, the lender will pay the remaining R7000 to the business less their fees.
THE BELOW FORM ONLY APPLIES TO INVOICE DISCOUNTING. PLEASE ONLY SUBMIT THE FORM ONCE AND CHECK YOUR INBOX FOR A CONFIRMATION EMAIL.