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What is Selective Invoice Discounting and how does it work?

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Selective invoice discounting is a means by which a company can finance its operations by receiving cash in the form of a loan from an unpaid invoice. A finance provider will lend the company a percentage of the value of the invoice for a fee.

The company can then have access to cash on its unpaid sales thereby improving its working capital and investment opportunities when cash flow is short or business is slow.

It remains the responsibility of the company to issue the invoice to its customer and chase up payment.

How does selective invoice discounting work?

A company will make a decision that it wants to release some capital from a selected unpaid invoice. It will then assign the invoice to a selective invoice discounting provider.

The provider will approve the invoice and come to an agreement on its terms and conditions. This will include a quote and terms on conditions of repayment of the loan. The loan quote will cover up to 95% but in most cases around 70 to 85% of the value of the invoice.

This amount will be advanced as a loan to the company.

The loan plus the finance provider’s fee is to be repaid subject to the terms and conditions agreed. The company will receive the outstanding balance of the invoice once they have received full payment from the customer and it is up to the company to chase up outstanding debt. 

 

 


What is the difference between selective invoice discounting and spot factoring?

With selective invoice factoring the company selects an unpaid invoice and then receives cash in the form of a loan from the financial provider for a percentage of the invoice amount. The company is responsible for chasing up the value of the invoice and paying back the loan.

With spot factoring the company sells its invoice to a 3rd party financial provider for a percentage of its value, the finance provider is then responsible for chasing up payment from the customer, the company is no longer in control of that.

 

What are the advantages and disadvantages of selective invoice discounting?

Advantages of selective invoice discounting
    • Available to a wide variety of business's including new starters
    • Releases cash locked into customer invoices
    • No long term contracts with the financial provider
    • Increased cash flow for the company, increased working capital, reduced need for overdrafts orother debt facilities
    • No security required, just an unpaid invoice
    • No impact to the company on relations with customers. The discount company has no contact with the customer
    • The company selling the goods and services maintain control over sales receivables
    • Confidentiality is maintained as suppliers and customers don’t need to know that finance is obtained against sales invoices
    • Company and customer benefit as company has cash and customer has credit facilities helping to maintain good relations

 

Disadvantages of selective invoice discounting
    • Discounting company charge a feww for the loan so profit margins are decreased
    • Comparisons should be made with other forms of loans as they may be cheaper
    • Stakeholders may not be happy with this form of finance
    • Only available on commercial invoices

  • Have you thought about Selective Invoice Discounting as a cash flow solution for your business?

    Invoice finance allows you to release cash quickly from your unpaid invoices.

    As your lender, we can release up to 90% of your invoices within 24 hours. On payment of the invoice from your customers, we will then release the final amount minus any fees and charges. There are different types of invoice financing options available to businesses depending on the situation and the level of control they require in collecting unpaid invoices.

    We are an invoice financing company who offer a solution whereby payments are collected on your behalf managed by our team of expert credit controllers so you can focus on running your business. Our solution is offered to businesses who want to maintain their own credit control processes, therefore this remains strictly confidential so your customers are unaware of our involvement.

    The benefits of invoice finance companies such as Hitachi Capital
      • Boost your cashflow without having to wait up to 120 days for your customers to pay you
      • An invoice finance company with a revolutionary digital onboarding process, giving you quicker access to funds and the ability to take on new business remotely during this lockdown period
      • Release up to 90% of the invoice straight away, and the final 10% when the invoice is settled
      • No need to chase your invoices, we can do it for you
      • 6 month trial period followed by a rolling contract

Get a quote online or call 0808 250 0859

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We have revolutionised invoice discounting with our digital onboarding process


We are an award winning invoice discounting company

Best Invoice Finance Service 2021

Highly Commended Factoring Provider 2021

Best Invoice Finance Provider 2020


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Please note that costs are an estimate only and are based on the entered values. Your final quote may change once a Business Development Manager has assessed your business in more detail.

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Why choose Hitachi Capital Invoice Finance as an alternative to a Business Loan

      • A 6 month trial period so you can be sure the product is right for you
      • Followed by a 6 month rolling contract – we don’t tie our clients in for long periods
      • A one fee solution with no hidden fees
      • Award-winning client service by our team of expert Client Managers
      • Our Relationship Management team are in the field to visit you in person
      • We are part of Hitachi Capital (UK) PLC, a company that is going from strength to strength – we’re here for the long term.

Smarter, Faster and Simpler Cashflow Finance with Hitachi Capital

Smarter, Faster and Simpler Cashflow Finance with Hitachi Capital

Smarter, Faster and Simpler Cashflow Finance with Hitachi Capital

Find out how we are revolutionising the way UK SME's access cashflow finance.


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