Invoice & Receivable Discounting
An advance against approved outstanding invoices, released as they are raised rather than as they are paid. The balance follows when the customer settles, less the discount charge for the days the money was out.
SKY Financial Solutions/Short-Term Funding/Bill Discounting
Section E · ii
Bill Discounting
An invoice raised is cash you have earned and cannot yet spend. Discounting releases most of it on issue instead of on payment, so the receivable book funds the next order rather than sitting idle for sixty or ninety days.
Disclosed or Confidential
Disclosed facilities notify the debtor and are usually cheaper; confidential ones leave the customer relationship untouched and you continue collecting in your own name. Which fits depends on your customers, not on the lender.
Whole-Turnover or Selective
Put the entire sales ledger behind the facility for the finest pricing, or discount only the invoices you choose — typically the large, slow-paying ones — and leave the rest of the book alone.
Recourse & Non-Recourse
Under recourse the debt comes back to you if the customer does not pay. Non-recourse structures place that risk with the lender or an insurer at a higher cost — worth it where one or two names carry most of the ledger.
What sets the advance rate
- Invoice quality — undisputed, for goods or services already delivered, on standard terms, and evidenced by a signed delivery note or acceptance.
- Debtor concentration — a ledger where one customer is most of the balance is funded more cautiously than a spread of names, whatever the total.
- Ageing profile — invoices past terms are usually excluded from the eligible pool entirely, so the funded figure follows the current book rather than the headline balance.
- Dilution history — credit notes, rebates and returns reduce what actually gets collected, and the advance rate is set against that record, not against gross sales.