Making the Most of Your Available Capital with Invoice Discount Arrangements

An invoice discount is a loan against the outstanding invoices that a company has issued. In some cases companies can draw down up to 80% of their outstanding invoices. While this may seem like a situation that would be hard to get back out of, surprisingly large numbers of companies use this kind of financing to keep themselves on top of their game.

Look at it this way, a company that has just started turning over customers can take advantage of all of that potential cash flow by making an invoice discount loan against outstanding invoices. In general the finance company will charge a small fee for the service but that is such a small factor when you consider that the average 80% balance is constantly updated as new invoices are issued. This way the company will constantly have access to the funds they are working so hard to receive. This allows a company to grow at a quicker rate than relying on customers to pay their credits on time.

The other side of the coin is just as compelling. The fact that companies will have access to their invoice discount loan instantly allows them to offer better credit terms to their customers as they will no longer rely upon the fact of customers paying within shorter time scales. So an invoice that is usually required to be paid within, let us say seven days, can now be extended to thirty, sixty or even ninety days. This in itself has some great advantages for companies. The longer the credit terms on an invoice, the more interest can be charged for the service. If calculated correctly this can actually cover the cost of undergoing an invoice discount scheme. In the end it all comes down to a company planning its finances correctly.

There are, however, some instances where this kind of financing is not always the best option for a company. Any company that relies heavily on other creditors could be made to appear less reliable by taking this kind of financing and, as such, loose valuable creditors. Seeking the best advice from professionals should be any company’s goal when it comes to matters such as invoice discount.

AJ Martin & Co. Ltd are Factoring and Finance Specialists and is the company to turn to when it comes to getting your business finances in order. We offer services such as invoice discount, finance and factoring which are all means to better the cash flow of your business. We have a team of highly trained advisers who will be more than happy to help you and your business reach your full potential. All it takes is one phone call to take your business one step closer to success.