Invoice Discounting is a financing method where a business borrows money against its unpaid invoices while retaining control over sales and collections.
How It Works:
- A business issues invoices to customers.
- It approaches a lender for funding.
- A percentage of invoice value is provided as advance.
- The business collects payment from customers.
- The lender is repaid after collection.
Benefits:
- Improves working capital
- Maintains customer relationships
- Provides quick access to funds
- Supports business growth
Example:
A company raises funds against invoices issued to clients and repays the lender after receiving payment.