In this article:
- What is confidential invoice discounting?
- The advantages of confidential invoice discounting
- Is confidential invoice discounting for you?
What is confidential invoice discounting?
Confidential invoice discounting is one of the two main types of invoice finance, and is an agreement that is kept confidential between the business in question and the finance provider.
Clients and customers pay the invoiced money into an account as normal, but they are not made aware that a finance provider is involved.
There are now dozens of different avenues to take when your business needs funding. Depending on your particular circumstances, there’s everything from the very traditional products like loans and overdrafts, to those more modern alternatives like crowdfunding. Non traditional finance products are lesser known, but do often offer benefits that the more generalized products can’t match, and they’re open to startups, SMEs and multinationals alike.
Confidential invoice discounting is one of these funding options, and in this article, we’re going to look more at what it means and how it works.
Advantages of confidential invoice discounting
Lots of businesses choose confidential invoice discounting, as it has numerous potential benefits. They include the following:
1. Boosting cash flow
Benefits of this are mainly in relation to cash flow, which means that invoice finance is not designed for people who need funds that they can’t pay back until a later date. It’s for businesses who are operating well, but can’t realise the cash they’re owed quickly enough. The upshot is that it allows these businesses to be more agile. They can create cash quickly by supplying goods and services, and then this can be used for everything from new investments and opportunities, to normal monthly expenses. Cash flow is one of the biggest headaches for SMEs, even successful ones, so there’s little surprise that invoice finance is popular for a lot of businesses.
2. Maintaining customer relationships
This is especially beneficial for businesses who want or need to introduce invoice finance as part of their accounting, but don’t want any of their relationships to change. Some customers for instance might change their opinions of the business if they know an invoice finance provider is being used. In addition, other forms of finance might mean that the finance provider takes control of collections activity, but again, established businesses are likely to have this well under control.
Is confidential discounting for you?
Ultimately, confidential invoice discounting is a good option for businesses that are successfully selling their products and services, but find that late payments or even non payments are making things more difficult than they need to be. It won’t change your relationship with customers, it’s often fairly cost effective, and it doesn’t require lots of negotiation and thinking about repayments. Of course, as with all financial decisions, it’s important to consult an independent advisor before you come to a decision - invoice discounting has many benefits, but isn’t for everyone.