Invoice discounting is often praised as a sustainable long-term funding solution, but it can also provide a cash boost to aid capital investment.
Capital investment allows businesses to meet their objectives and acquire additional assets for the future, such as property and machinery. Putting money into a company can enable cost savings, technological advancement and growth.
Invoice discounting can help SME invest in assets and operational goals both in the short and longer term by releasing the value of their sales ledger.
A cash injection for capital investment
Unpaid customer invoices are often one of the highest value items on a company’s balance sheet and releasing the capital tied-up in them can provide a cash injection which improves liquidity immediately.
The cash lump sum can enable capital investment. It is often used by companies to invest in new equipment, purchase property or manage growth.
Plus, unlike a business loan where the borrowing would need to be paid back over a set period, the funding is an advance of monies already owed. This means that the majority of the cost will be regained when a customer pays their invoice, putting less pressure on an SME.
Reliable long-term cash flow
This type of finance is well-known for providing a sustainable funding line by releasing cash from invoices as soon as they are raised. Over the longer term, this means that SMEs can access the value of sales ledger and have a reliable source of cash flow, regardless of whether clients pay their bills on time.
The reliability of invoice discounting can make it easier to meet goals and objectives over time. Plus, because the funding line is connected to turnover, available capital grows with a company’s balance sheet, allowing for ongoing capital investment.
How does invoice discounting work?
At Close Brothers, we keep our funding solutions simple and sustainable. Our invoice discounting facilities work in four simple steps:
- A business raises an invoice
- We pay up to 90% instantly
- The business arranges payment from customers as usual
- When the invoice is paid, the business receives the balance, minus pre-agreed fees
