Oxstones Investment Club™For all businesses, big or small, it’s all about cashflow. Without the proper and smooth cashflow, your business can suffer indeed. But your business cashflow can be influenced and affected by so many factors – the non-payment and late payment of customers, a poor inventory, and so on. So how can you make sure that you have cash at hand for any eventuality at all times? There is one solution that has benefited many enterprises for years: invoice discounting.
Invoice discounting is one financial service that falls under invoice financing. The basic principle behind invoice discounting is this: you borrow money or cash from a financial provider based on the invoices you have already raised. You can also think of invoice discounting as borrowing in the short term where your enterprise can receive cash depending on the amount of invoices you already have.
The reason why invoice discounting is so popular nowadays stems from the fact that it is a service that benefits everyone – the borrower and the financier both. Why is it a win-win situation for everyone? Because the borrower receives money based on cash that is to come, whilst the financier lends money with the knowledge that the invoices serve as collateral. There is hardly any uncertainty in this type of arrangement as compared to standard loans and the like.
The other advantages of invoice discounting for your business
Fast cash
If you need cash quickly, then invoice discounting is for you. This is especially true in emergency situations or when you know that your cashflow is running out. Rather than wait weeks for a bank loan to be approved, you can get your cash in as little as one day.
A better cashflow
All companies benefit from improved cashflow. A good cashflow gives you the freedom you need to invest, make financial decisions, and acquire new customers. With a proper working cashflow, you need not worry about making ends meet as a business – you can pay your suppliers on time, purchase assets and equipment, increase your inventory, and pay your employees promptly. In short, you can run your business the way it is supposed to be run.
No need to put assets up as collateral
Unlike other types of loans, an invoice discounting service only allows you to put up your invoices as collateral. The money you receive will be based entirely on your unpaid invoices. You do not need to risk any of your other assets as collateral for the service.
Whether you opt for invoice discounting or factoring as part of an invoice finance service, you will not be at the losing end. In fact, since it is a win-win situation, everybody benefits in the end.
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