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Invoice discounting is a popular method of invoice finance. Invoice finance is basically the raising of money against invoices that are yet to be paid. This type of invoice finance works best in companies that have a high annual turnover (if not, consider factoring), if the invoices have trade credit terms of over a month, and if the business is well-established and has credit control functions that are well-managed.

This type of invoice finance is popular because of its many advantages over other methods of raising business funding. Probably the greatest advantage of this type of invoice finance is the fact that you will get your money without having to wait for the maturity of invoices which usually takes place between 30 and 90 days. This is particularly important if your business does not have a large capital base. The money you get could then be used to fund the expansion of your business. The fact that you are able to get money quickly is advantageous in that you will not have a problem in case of an emergency.

Another advantage of this type of invoice finance is the fact that you get almost the full amount of your invoice (as much as 90% of the value of the invoice). You could combine invoice discounting with Bad Debt Protection to minimize the risk of failing to get paid due to failing customer businesses. Another advantage of this type of invoice discounting is the fact that you will get unparalleled flexibility. The flexibility is because the facility will reduce and grow in relation to outstanding invoices.

Another advantage of invoice discounting is the fact that it is safer than other methods of invoice financing. This option is one of the best methods of raising funds because you will pay very little for the service. With most financiers (such as factors) offering this service, the charges are at an interest rate of between 1.5 to 3% over the base rate while the fees range from 0.2 to 0.5% of turnover. This is only a fraction of what you would pay with other lending institutions such as banks.

Yet another advantage of invoice discounting is the fact that you can get financiers offering the service over the internet. This is advantageous in that you get to compare different options. Following the laws of probability, this increases your chances of getting a credible and reliable service with low charges. The internet also provides convenience and anonymity.