Is Invoice Discounting the Right Supply Chain Finance Option for You?

Invoice Discounting Right Option for Supply Chain Finance and Solution to Your Cash Flow Challenges

Is invoice discounting the solution to your cash flow challenges? Can you leverage invoice discounting to get quick short-term supply chain finance?

Suppose you are an MSME supplier or an MSME component manufacturer. In that case, the chances are that your accounting team is searching for solutions to maintain parity between cash outflow and inflow.

Who Should Opt for Invoice Discounting?

You should consider invoice discounting if you are an MSME with a yes for an answer to the questions in this checklist.

  • Do you have in-house invoice management? 
  • Do you have an insight into your sales volumes and customer order sizes?
  • Do you have well-defined credit procedures? Lenders will be particularly interested in your case if the answer is yes.
  • Do you have a grace period of a minimum of 30, 60, or 90 days for your payment terms?
  • Do you have a systematic record of invoice payment collections? If yes, that’s great! Again, lenders pay much importance to this factor.
  • Finally, how good is your turnover? A high turnover is again a big positive to attract the interest of lenders.

What is Invoice Discounting?

It is a short term credit for your business that you get from a lender by mortgaging your accounts receivable instruments, i.e. invoices. You repay the amount to the lender once you get paid for the invoices from your customer.

How Does Invoice Discounting Work?

Suppose you opt for an invoice discounting solution from a digital receivables financing platform. In that case, this is how it will work:

  • You prepare an invoice against the goods that you have sold to your customer and upload it on the digital receivables financing platform.
  • The digital receivables financing platform receives the invoice and shares the same downstream with a lender in their ecosystem.
  • The lender approves your invoice and releases a short-term loan to you against a percentage that is deducted from your invoice with a clause for you to repay it within a mutually agreed-upon grace period.
  • Your in-house invoice payment collection team collects the invoice.
  • Finally, when your customer makes the payment against the said invoice to you, you repay the amount minus the discounted quantum.

If the above information interests you, get in touch with our sales consulting team at info@credlix.com to find the right invoice discounting solution for your MSME. 

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