What is Invoice Discounting ?Invoice discounting, sometimes known as spot factoring, is a way for small, under-capitalised businesses to generate a working capital foundation from their accounts receivables. It can also be used to overcome unforseen, short-term cash-flow problems. It is ideal for the business which has a great opportunity and the energy and skills to make it happen, but lacks adequate capital. It is similar in some ways to factoring, but also quite different in others. Much more flexible, you use it only when you need it. It is also ideal for smaller businesses that would not qualify for factoring or bank debtor finance. It can be very cost-effective for businesses in a rapid growth scenario. For example: A small contracting firm gets a big opportuntiy, perhaps a government backed contract, that will greatly increase their turn over. But, they need to take on two or three more workers and purchase various items to make the job happen. If they are not in a position to raise money from the bank they will run out of cash before they receive the income the new contract will generate. The business owners retain 100% ownership and control of their business and don't sacrifice shares to generate capital. For some businesses,
especially tradesmen,
it's even possible to set things up so that there is little or no cost to the business - the customers pay the discount for the privilege of having the credit.
Find out more about how to make this system work for your business.
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