What is Invoice Discounting?
                     
INTRODUCTION
INVOICE DISCOUNTING IS A FINANCIAL SERVICE IN 
WHICH A PROVIDER LENDS CASH TO A COMPANY UP 
TO THE VALUE OF ITS UNPAID INVOICES. 
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SOURCE:  STENN.COM
HOW DOES INVOICE 
DISCOUNTING 
WORK? 
1. A SUPPLIER SELLS GOODS TO A BUYER AND RAISES 
AN INVOICE, OFTEN WITH DEFERRED PAYMENT 
TERMS OF UP TO 120 DAYS.
2. THE SUPPLIER NEEDS WORKING CAPITAL, SO 
SUBMITS THE INVOICE TO AN INVOICE 
DISCOUNTING PROVIDER, PRESENTING IT AS 
SECURITY FOR A SHORT-TERM LOAN.
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SOURCE:  STENN.COM
HOW DOES INVOICE 
DISCOUNTING 
WORK CONT. 
1. THE INVOICE DISCOUNTING PROVIDER EVALUATES 
THE INVOICE AND CREDITWORTHINESS OF THE 
BUYER AND AGREES TO ADVANCE A PERCENTAGE 
(OFTEN UP TO 95%) OF THE INVOICE TOTAL AS A 
SHORT-TERM LOAN.
2. THE PROVIDER CHARGES A PRE-AGREED FEE, 
TYPICALLY 1-3% OF THE LOAN.
3. THE BUYER PAYS THE INVOICE WITHIN THE AGREED 
120-DAY WINDOW.
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SOURCE:  STENN.COM
BENEFITS OF 
INVOICE 
DISCOUNTING
1. EASY AND FAST ACCESS TO WORKING CAPITAL 
THAT WOULD OTHERWISE BE TIED UP IN UNPAID 
INVOICES.
2. IMPROVED CASH FLOW FOR SUPPLIERS TO PAY 
THEIR OWN SUPPLIERS OR INVEST IN THE GROWTH 
OF THE COMPANY.
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SOURCE:  STENN.COM
BENEFITS OF INVOICE 
DISCOUNTING CONT.
1. FINANCE APPROVAL IS BASED ON INDIVIDUAL 
INVOICES RATHER THAN CREDIT HISTORY OR 
LONG-TERM FORECASTS, MAKING IT MORE LIKELY 
THAT COMPANIES ARE GIVEN FINANCE.
2. DISCOUNTING FEES USUALLY NEVER EXCEED 1-5% 
OF AN INVOICE AMOUNT.
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SOURCE:  STENN.COM
RAPID GROWTH
WORKING CAPITAL IS ESSENTIAL TO FUND NEW 
EQUIPMENT, FACILITIES AND STAFF TO SUPPORT 
GROWTH. INVOICE DISCOUNTING ALLOWS COMPANIES 
TO ACCESS CASH QUICKLY RATHER THAN WAIT WEEKS 
OR MONTHS FOR INVOICE PAYMENTS.
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SOURCE:  STENN.COM
CASH FLOW 
PROBLEMS
 INVOICE DISCOUNTING FREES UP WORKING CAPITAL 
TO COVER BUSINESS EXPENSES.
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SOURCE:  STENN.COM
REFUSAL FOR LOANS 
FROM BANKS
MANY SUPPLIERS MAY SIMPLY BE REFUSED LOANS 
FROM BANKS DUE TO LIMITED OR POOR CREDIT 
HISTORY. IF A SUPPLIER DOES GET A BANK LOAN, IT 
OFTEN COMES WITH LONG-TERM REPAYMENT PLANS 
AND HIGH INTEREST RATES, WHICH CAN PROVE 
DIFFICULT TO COMMIT TO.
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SOURCE:  STENN.COM
WHAT IS SELECTIVE 
INVOICE 
DISCOUNTING?
SELECTIVE INVOICE DISCOUNTING MEANS THAT A 
SUPPLIER SELECTS SPECIFIC INVOICES TO SUBMIT FOR 
FINANCE, RATHER THAN FINANCING ITS ENTIRE 
ACCOUNTS RECEIVABLE LEDGER.
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SOURCE:  STENN.COM
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