1) Selective invoice discounting in a nutshell
Factoring facilities are traditionally whole turnover, meaning the company must factor their entire sales ledger. This can become expensive and not reflect the most cost effective solution for companies to raise their working capital.
Many small businesses have seasonal fluctuations in cash flow and so selective invoice finance would be a much cheaper solution.
2) Also known as...
Spot factoring , Spot invoice finance, Single invoice factoring
3) How selective invoice discounting works
Selective invoice discounting works in a similar way to spot factoring.
- The company, typically with revenues over £500,000, assigns an invoice to the discounting company, having agreed terms and fees
- The discounting company advances a percentage of the invoice face value to the business client upfront, typically 70-85%.
- Unlike factoring, invoice discounting helps you keep control over your own sales ledger and client relationships
4) Advantages of selective invoice discounting
For a fee, invoice discounting companies can unlock funds tied up in an individual unpaid invoice so that your business receives a percentage of the funds without waiting for the end customer to pay. For a large invoice, this process can provide a large cash boost for a business.
Invoice discounting lets you keep control of your sales ledger and your client relationships.
5) Disadvantages of selective invoice discounting
Typically, the traditional invoice discounters don't allow businesses to get finance against their entire sales ledger, despite the fact that fees are charged against the entire turnover of the business.
It can take a long time, up to several weeks, to set up with a selective invoice discounting facility.
Assigning an invoice
Unlike with traditional ‘whole ledger’ factoring , the business may not have an existing relationship with the discounting company. It may take several days or weeks to apply and be approved, and once that is done funding is advanced when the business client ‘assigns’ an individual invoice to the discounting company.
7) Next steps
At MarketFinance, our selective invoice discounting solution allows you to get up to 90% advanced against specific outstanding invoices.
It’s quick and easy to access funds, which means you can get the cash flow you need to get on with business. With MarketFinance, you get:
- Fast funding: quick funding decisions and set-up
- Hassle free experience: easy to use digital interface
- Help in real-time: personal customer support
- Straightforward costs: no hidden fees
- What is working capital - a guide to working capital solutions
- What is purchase order financing?
- What is trade finance?
- What is import finance?
- Accounts receivables financing
- What is asset lending?
- What is asset finance?
- What is export finance?
- What is transport finance?
- What is recruitment finance?
- What is manufacturing finance?
- What is invoice finance?
- What is factoring?
- What is spot factoring?
- What is invoice trading?
- What is invoice discounting?
- What is selective invoice discounting?
- Factoring vs invoice discounting
- The advantages and disadvantages of debt factoring
- How to compare factoring companies
- Invoice finance vs overdrafts
- Invoice finance vs business credit cards
- What is a debenture?
- What is working capital?
- Peer to peer finance, crowdfunding and alternative business funding
- What is the peer-to-peer finance association?
- How to deal with late payment
- Top tips to improve cash flow