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What are the requirements for invoice discounting?


Invoice discounting is a means of unlocking working capital tied up in invoices by selling them to a factor. With an invoice discounting agreement the business remains fully in charge of customer communication, sales ledger and debt collection, which allows greater control and confidentiality as well as providing a higher return. However, invoice discounting requirements are more stringent than for an invoice factoring agreement. Usual criteria are an annual turnover of at least £500,000 (and sometimes £1 million), a minimum net worth of £30,000 and a proven history of profitability. You must also have well established resources and procedures in place to manage all financial administration, a reasonable spread of customers and be subject to regular auditing by your invoice discounting provider.

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An additional question: Respond to this Question

  • Why turn to a factor rather than seek a bank loan?
  • How does a factoring finance arrangement work?
  • Who collects the debt due, the factor or my business?
  • What's the difference between factoring with recourse and factoring without recourse?
  • Does factoring require a minimum number of invoices?
  • What does a factoring company do in the case of nonpayment?
  • Do my customers know of the factor’s involvement?
  • Is there any collateral requirement for factoring?
  • How quickly can I access cash for the invoices I sell to a factor?
  • Who do I turn to if I have a dispute with my factoring company?
  • I have overseas clients; can I factor international invoices?
  • Is it easy to terminate a factoring arrangement?
  • What regulations apply to factoring companies?
  • What does working capital mean to your business?
  • What is the difference between factoring and bill discounting?
  • What is credit insurance?
  • What is export factoring?
  • What is the difference between invoice factoring and merchant cash advance?
  • What is the difference between factoring and securitisation?