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Published : August 10, 2023, Updated : November 23, 2023

Is Invoice Discounting Beneficial for Small Businesses?

Is Invoice Discounting Beneficial for Small Businesses?

Small businesses, in the current Indian business landscape, make up a considerable chunk of its ecosystem. These businesses are responsible for around 40% of India’s total exports and around 45% of India’s entire manufacturing. However, the instability percentage of these businesses is equally high, especially where working capital is concerned.

Let’s also talk about the solution here!

One of the best ways to get access to quick cash in such financial crunch situations is to unlock the cash trapped in the supply chain. Here, Invoice Discounting would work best. It’s a great way to fulfill short-term financial needs on competitive borrowing terms.

What is Invoice Discounting?

Invoice Discounting, also termed bill discounting, is a financial arrangement where the company sells its unsettled invoices to a financing company at a discounted rate. Invoice discounting allows businesses to get their money in the present from past earnings they were going to get in the future.

Typically, invoice financing companies don’t lend the full invoice amount. Instead, they offer a certain percentage, usually ranging from 60% to 85%, as an advance against the unpaid invoice. The remaining amount, minus fees, is paid to the business once the customer settles the invoice.
Read More about Invoice Discounting

How Invoice Discounting Benefits Small Businesses?

Invoice discounting helps SMEs in a plethora of ways:

Boosts Cash Flow in the Business

With the help of Invoice Discounting, small firms can enable uninterrupted cash flow in their businesses. For them, conventional methods have always been a tough road to take, with a long loan process and high interest rates. Invoice discounting, at the same time, ensures faster cash and easy settlements.

With a managed and seamless cash flow, these small businesses can grab the opportunities that come their way with confidence.

Easy Repayment Process

Invoice discounting is a part of supply chain finance. It’s a transparent lending process with the aim of making transactions efficient and cost-effective for both buyers and sellers. In Invoice Discounting, the receiver gets a significant part of the unsettled invoice upfront from the provider by following some basic steps. The borrower can opt for a flexible repayment schedule, ranging from 15 days to 6 months.

This arrangement makes the process all more convenient. Not only this, the borrower even has the option to pay in lump sum in order to avoid extra interest charges.

Zero Collateral Required

In Invoice Discounting, the borrower gets discounted from providing any collateral for receiving funds. In such financial arrangements, only the Invoices work as a guarantee. Therefore, it’s a collateral-free method where SMEs with low profits find huge benefits.

Custom Features Serve Loan Purpose

For small businesses, Invoice Discounting’s customization offers are a true blessing. Sellers get the liberty to decide how much cash they want by financing their invoices partially or totally. Not only this, but also they get the freedom to control the repayment timeline. For short-term cash needs, they usually repay within 30 days. Some lenders even provide a revolving line of credit for 12 to 18 months, allowing businesses to borrow money repeatedly during that time.

Invoice Discounting Minimizes Bad Debt Risks

Bad debt risk means the risk of non-payment or where the chances of payment are too low. Unfortunately, businesses have to deal with such situations. Invoice discounting helps businesses deal with this situation by conducting proper credit checks on the debtors. Also, many financial companies have professionals to deal with such situations.

Seasonal Demand Management

Small businesses might have to deal with a certain period of time where they won’t enjoy much sales or profit. There could be seasonal demand, while other months could be ideal. Seasonal demand fluctuations can lead to challenges for businesses as the invoice collection period remains constant. This can result in a lack of funds to meet peak-season demands. However, invoice discounting offers a solution by providing a steady cash flow, enabling companies to fulfill their seasonal work requirements.

Low Borrowing Rates

Invoice discounting is a special financial service where the seller gets the money in advance for their unpaid invoices by a financial company, but the responsibility to repay the loan falls on the buyers. Due to this, the lender considers the buyer’s ability to pay, their financial strength, and the relationship between the buyer and seller. This is the reason why businesses get funds at a much lower rate than loans.

Longer Payment Time, Happy Customers

Keeping your customers happy is the deciding factor in any business, whether your customers stick with you or switch to your competition. Allowing them longer payment time means a long happy relationship with your customers, and you retain them for years to come. \

The Credlix Advantage!

Here comes Credlix at your rescue! Your reliable platform for seamless Invoice Discounting for small businesses services. With us, small firms can easily and quickly get funds against their unsettled invoices at the best rates possible. Enjoy uninterrupted cash flow, easy repayment options, and the freedom to customize your financing needs.

Credlix has a transparent lending process that makes it easy for both the buyer and the seller. Also, our professional team handles bad debt risks with proper credit checks. Leverage Credlix’s Invoice Discounting to thrive in the dynamic Indian business landscape.

To Conclude

As a small business, discover the benefits of Invoice Discounting in India and make the most of this very useful financial tool available at your disposal. Release the cash trapped in your supply chain, boost cash flow, and enjoy easy repayment options. With no collateral required and custom features to suit your needs, Invoice Discounting minimizes bad debt risks and helps manage seasonal demands.

Get funds at lower rates and extend payment time to keep your customers happy and loyal. Don’t let working capital constraints hold you back—leverage Invoice Discounting for financial flexibility and growth!

Get access to immediate working capital

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