Invoice Financing

Invoice financing meets short term liquidity need of the company by securing finance against the unpaid invoices of the company, which is the security for the lender i.e., if the company fails to make payment then the lender will collect payment from the debtors itself. This is useful for a business where debtors holding are high while collection of debt proceeds is slow. If debtors are Government Organisations then chance of bad debts is minimum and you can avail this financing option at better interest rates.

Types of Invoice Finance

Invoice Factoring: Invoice Factoring is an arrangement wherein a company approaches a lender to sell its accounts receivable (unpaid invoices) at a discount to meet its present and immediate cash needs. The lender (called a factor) generally pays 70-75% of the value of the invoice upfront and the balance amount after deduction of interest and other charges on receiving full payment from the customers. The responsibility to collect payment from the customers, manage the credit period of the business lies with the factor.

 

Invoice Discounting: Invoice Discounting is a method in which the company uses its unpaid accounts receivable as collateral for getting a loan which could be as much as 90 per cent of what the invoices are worth. The company itself is responsible for debtors’ collection, invoice processing & follow up for payment. There is a remote chance that your customers will be aware of your credit facility being availed against the invoices.

Benefits & Advantages

  • Releases the cash locked in credit sales
  • Improves cash flow which can be used to pay for business expenses or purchase machinery
  • Fund generated helps in pushing the sales or to expand the current business
  • Processing time is low as decisions to lend against invoices can often be made faster
  • More flexible than traditional method of loan
  • No collateral may need to be given

Eligibility Criteria

  • The credit period offered to Debtors should be as per the industry standard credit terms.
  • The credit history of Debtors should be good.
  • Proof of filing of Income Tax/ GST Return
  • CIBIL Score of the applicant should be satisfactory.
  • Some Lending Institution also have minimum turnover criteria.

Procedure

STEP 1: After selecting a bank, we assist you to fill the loan application form & attach the required documents.

 

STEP 2: Bank will evaluate the submitted documents. The bank will verify Invoices & Ledger of Debtors.

 

STEP 3: After all the evaluations bank will send a sanction/ approval letter.

 

STEP 4: Signing of the agreement and disbursal of the amount.

Invoice Discounting is a facility against your unpaid invoices where your Accounts receivable acts as a security.

Invoice Discounting is good for your business, if you have:

  • Less bad debts
  • Customers who make timely payments
  • Customers have a minimum 30 days credit period
  • You meet the minimum turnover criteria

It depends on the type of Invoice Financing you are opting for. In case of Factoring the responsibility lies with Factor while in case of Invoice Discounting with the borrower.

Service Charge plus Discount charge as per the agreement which differs from one lender to another.

The quantum of loan is in the range of 60- 90% of the accounts receivable (Invoice amount) and depending upon various other factors.

What’s Included

  • Consultation with our Loan Advisor
  • Complete Assistance in Paperwork
  • Fast loan Disbursal

Documents Required

  • Copy of PAN card
  • Address proof
  • Transaction Details with debtor/debtors for which finance is required
  • Outstanding Invoices
  • Bank Statement of the Business Account for at least six months.
  • Financial Statements
  • GST registration certificate and GST returns

Invoice Financing


Invoice financing is the answer to your short term liquidity needs which secures funds against the unpaid invoices of your company. Filecrat will help you get finance against your pending invoices.

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