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Invoice Discounting

Confidential Invoice Discounting (CID) is a financial product which offers an established business a Positive Cash Flow Solution. The borrower’s sales invoices (Accounts Receivables) are used as the security for a working capital business loan normally up to 80% or even 90% of the Sales Ledger Book Value.

Unlike Invoice Factoring, Confidential Discounting offers a number of advantages but is only available to established businesses.

• Credit Control remains in the complete control of the borrower.
• This is a totally confidential arrangement with the lender and is never disclosed.
• A number of different payment facilities are available within the scheme (Single Debtor, Selected Debtor and Whole Ledger payments)
• It can provide a larger pool of working capital and reduce bank borrowings.

There are however some key issues involved with Confidential Discounting which can differ from conventional Invoice Factoring. Whereas factoring is normally available to almost any type of business in virtually any credit status position, to qualify for Confidential Discounting the borrower company must fit strict criteria:-

• Only established businesses with healthy financial information.
• Must have a clear and checkable credit history.
• Only Larger Turnover businesses.
• Lender does NOT deal with Collections or Administration matters.
• A Non Disclosed facility

An important fact about Confidential Discounting is that this is a working capital loan to the business which is secured by the book debts. This is repayable by the business in any event.

How it works in practice:-

The lender will take an application from a new borrower, they will check out the business and study the client listings and "concentration" of the Sales Ledger. They will look at gross turnover levels etc. Once the lender is comfortable, they will issue an In Principle Response including their "Heads of Terms". Providing these are acceptable to the borrower, the lender will carry out a full audit on the sales ledger and test the accounting systems which are in place. When everything has been approved the lender will "go to offer" and upon signing the funding will be available to the borrower.