Improve Cash Flow While Retaining Credit Control

Invoice Discounting for UK Businesses

Invoice discounting allows your business to improve cash flow while keeping control of customer relationships, credit control and payment collections.

Instead of waiting 30, 60 or 90 days for customers to pay, an invoice discounting provider may release an agreed percentage of eligible unpaid invoices. Meanwhile, your finance team continues managing the sales ledger and speaking directly to customers.

Go-Factor helps UK businesses arrange invoice discounting, confidential invoice discounting and selective debtor finance through suitable funding providers.

What Is Invoice Discounting?

Invoice discounting is a working-capital facility linked to eligible business-to-business invoices. The provider makes an agreed percentage available before customers reach their normal payment dates.

Unlike factoring, the business normally retains responsibility for credit control and customer collections. Therefore, invoice discounting often suits established businesses with an experienced finance team and reliable sales-ledger procedures.

Why Do Businesses Choose Invoice Discounting?

Many established businesses have invested years in their customer relationships, credit-control procedures and finance teams. Invoice discounting allows those systems to continue while releasing working capital from eligible unpaid invoices.

Additionally, available funding can increase alongside qualifying sales. This can provide greater flexibility than an overdraft with a fixed limit.

Retain Credit Control

Your finance team continues managing the sales ledger and collecting customer payments.

Protect Customer Relationships

Customers continue dealing with the people and credit-control processes they already know.

Release Working Capital

Access an agreed percentage of eligible invoices before customers reach their normal payment dates.

Support Business Growth

Funding availability can increase as the eligible sales ledger grows, subject to the facility terms.

Move On From Factoring

An established business may move from factoring when its own finance team is ready to control customer collections.

Review an Existing Facility

Consider another funder when the current facility no longer provides the service, flexibility or funding required.

How Does Invoice Discounting Work?

  1. Goods or services are supplied. Your business completes an eligible sale for another business or qualifying organisation.
  2. A customer invoice is raised. The invoice records the completed sale and agreed payment terms.
  3. The invoice is submitted. The provider calculates the amount available under the facility.
  4. Working capital is released. Subject to approval, the agreed percentage becomes available to your business.
  5. Your business manages collection. Your finance team continues communicating with customers and collecting payments.
  6. The customer pays. Payment is made into the account agreed under the facility.

Invoice Discounting, Confidential Discounting or Selective Debtor Finance?

The right structure depends on how your business manages customers and which invoices create the cash-flow requirement.

Invoice Discounting

The business keeps control of credit management and customer collections while receiving funding against a wider eligible sales ledger.

Confidential Invoice Discounting

Eligible businesses retain credit control while the funding arrangement is not routinely disclosed to customers.

Selective Debtor Finance

The business funds selected eligible customers or invoices instead of placing the complete sales ledger into the facility.

Invoice Factoring

The provider normally supports or manages customer collections. Therefore, factoring may suit a business that wants credit-control assistance.

Can I Use Invoice Discounting Without My Customers Knowing?

Yes, confidential invoice discounting may be available to eligible businesses. Your company continues managing customer relationships and collections, while the facility is not routinely disclosed to customers.

However, confidential facilities normally require effective credit control, accurate reporting and reliable financial procedures. The funder will confirm the full eligibility requirements.

Is Your Business Facing Any of These Challenges?

  • You want better cash flow while retaining credit control
  • Your finance team wants to continue managing customer relationships
  • You have outgrown factoring and need greater flexibility
  • You would prefer customers not to know about the funding
  • Only one or two slower-paying customers create the main pressure
  • Your sales are growing faster than your overdraft
  • You have won new contracts but need additional working capital
  • Your bank will not increase its current lending limit
  • Your existing invoice discounting facility no longer works well

Go-Factor Insight: Credit Control Is Part of the Customer Relationship

One of the main reasons established businesses choose invoice discounting is not simply to improve cash flow. It is to retain control of customer relationships and credit management.

If a business has an experienced finance team and effective collection procedures, it may not need to hand those responsibilities to a factoring provider merely to release working capital.

However, control also brings responsibility. The business must keep its sales ledger accurate, collect payments effectively and meet the reporting requirements agreed with the funder.

Helen Boylett-Smith, Founder of Go-Factor

Which Businesses May Be Suitable?

Invoice discounting commonly suits established businesses that supply other businesses on credit terms. The company should also have suitable financial information and an effective credit-control process.

The funder will consider the business, sales ledger, customers, contracts and existing borrowing. In addition, it will examine customer concentration, credit notes, disputes and the quality of financial reporting.

Does Invoice Discounting Remove Bad-Debt Risk?

No. Invoice discounting improves access to working capital, but it does not automatically protect the business if a customer cannot pay.

Bad-debt protection or credit insurance may be available as an additional service. However, cover remains subject to approved limits, conditions and exclusions.

How Much Does Invoice Discounting Cost?

Costs depend on turnover, invoice values, customer quality, facility size and the work required from the funder. Charges may include a service fee, funding charge and other agreed facility costs.

Nevertheless, the headline rate should not be considered alone. Customer limits, reserves, minimum fees, notice periods and service standards can affect the amount of usable funding and the overall value of the facility.

Can Go-Factor Help Review an Existing Facility?

Yes. Your existing facility may no longer provide enough funding, suitable customer limits or the service your business needs. You may also be approaching the end of a contract period or considering a move from factoring to invoice discounting.

Have a short conversation with Go-Factor about what is not working. We can then speak to a suitable alternative funder and make an introduction where appropriate.

How Go-Factor Helps

  1. We have a short, friendly conversation. Go-Factor learns about your business, customers, credit control and funding requirement.
  2. We speak to a suitable funder. Based on that conversation, Go-Factor approaches an appropriate invoice discounting provider.
  3. We make the introduction. The funder explains the information it needs and takes the application forward with you.

Why Work With Go-Factor?

Go-Factor does not make invoice discounting more complicated than it needs to be. We begin by learning how your business currently manages customers and what you need the funding to achieve.

We then speak to a suitable funder and make the introduction. Go-Factor remains available to support the conversation and help move the funding towards completion.

Go-Factor is an independent UK commercial finance broker, an NACFB member and the 2023 NACFB Intermediary Excellence Broker of the Year. Helen Boylett-Smith brings more than 30 years of commercial finance experience to the business.

Frequently Asked Questions

Who manages customer collections?

Under invoice discounting, your business normally retains control of credit management and customer collections.

Will customers know about the facility?

Confidential invoice discounting may prevent routine disclosure to customers. However, availability depends on the business meeting the funder’s requirements.

Can I fund only selected customers?

Selective debtor finance may allow a business to fund invoices from selected customers rather than its complete sales ledger.

Can I move from factoring to invoice discounting?

Yes, if the business has suitable credit-control procedures, reporting and financial strength. The new funder will assess the complete position.

Can Go-Factor help after a bank decline?

Yes. A bank decline does not always mean that no funding is available. Go-Factor can discuss the circumstances and approach a suitable alternative funder.

Retain Credit Control While Improving Cash Flow

Have a short, friendly conversation with Go-Factor about your sales ledger, customer payment terms and funding requirement. We will then speak to a suitable invoice discounting provider and make the introduction.

Request Your Invoice Discounting Review

All facilities are subject to application, invoice eligibility, funder assessment, approval and agreed terms. Funding is not guaranteed.