Sometimes, several businesses prefer invoice discounting when faced with financial setbacks to keep operations running. The motive is to get fast cash, especially when customers are yet to make payments on the products provided. The invoice is often used as collateral to secure the loan granted by particular invoice discounting companies. Besides, loan amounts are based on account receivables, with the funds disbursed promptly. When the company seems to run low in funds with pending payments from clients, invoice discount or factoring comes in handy to acquire quick loans.
With invoice discounting, the intent is to help companies get funds essential for company operations as debts from customers yet to be settled. However, borrowing can become challenging for some companies with little knowledge about invoice discounting when applying for these types of loans. That said, this guide provides insights about invoice discount and how to get it effortlessly.
Invoice discounting Kenya
Invoice discounting definition
It can be taxing if you are unfamiliar with invoice discounting meaning but need to apply for a short-term loan against unpaid invoices as collateral. In definition, it is a type of loan offered to different companies while using due account receivables as security. Loans offered are below the total amount indicated on the outstanding invoices to ensure businesses refrain from losing collaterals.
Different companies have access to entire invoice discounting services in Kenya, provided they choose the right lender in the sector. Whether it is a supermarket, educational facility, NGO, hotel, or hospital, Mwananchi Credit ensures all businesses get loans secured with outstanding invoices. The approach allows for cash flows as firms don’t have to wait for customers to pay but get the funds immediately invoices are issued.
How invoice discounting works
When orders are completed, you send invoices to customers who, in turn, use it to make deposits into your account in the form of product payments. This is the typical process of how businesses operate. But you may need fast cash, especially when customers tend to delay in making payments. For this reason, you google ‘invoice discounting factoring’ to get fast cash while awaiting customer deposits. As such, here is a step-by-step process of getting invoice discounting;
- When sending invoices to customers, send copies to your financial lender for review and approval.
- A specific percentage of the total unpaid invoice amount is deposit into your account within a day or two.
- Invoice collection procedures are done by either company credit controllers or sales ledger agents from the lender.
- When the customer clears invoices, the balance is deposited into your account, less service fees.
With Mwananchi Credit Limited, borrowers enjoy a seamless process of getting fast cash against outstanding invoices. Yet, it is essential to understand invoice discount terms and conditions before requesting for these loans. This way, you get to know how it operates and governed by the lender.
Invoice discounting advantages and disadvantages
Loans are credits that need to be reimbursed over a given period hence accompanies various benefits and detriments. When you search ‘invoice discount Kenya,’ several financial lenders will show the pros and cons they come with. Mwananchi Credit Limited offers invoice discounts that consort the following advantages and disadvantages.
- Applications are confidential
- Borrowers are entitled to credit control and debt collection for customer accounts
- It is cheaper than factoring
- Modern providers accompany minimal risks or borrowing
- Requires robust and reputable in-house credit collection processes
- These loans tare offered to individuals with particular turnover
- Negative impacts on borrowers who depend on invoice discounting regularly
Invoice discounting Vs. factoring discounting
Factoring and invoice discounting tend to have the same meaning in providing short-term loans to different businesses. Notably, invoice discounting risks are much higher compared to factoring discounting. This is because lenders have no direct contact with debtors than factoring, where lenders have credit control and collection procedures.
Invoice discounting is the best option for businesses looking to get fast cash while awaiting payments from customers. Yet, applying for your short-term loan at Mwananchi Credit Limited ensures you get quick loans at better rates. Besides rapid approval rate and prompt disbursements, the lender accompanies various benefits to borrowers. Apply for your trade finance for the first loan with the best lender in Kenya.