Here is How Bill Discounting Can Improve Your Cash Flow

Every business organization, especially the small and medium sized businesses dread the financial instability caused by outstanding payments from the clients. However, allowing a certain period to delay the payments, especially to the long-term clients is quite common in the world of business. But when multiple clients do not make timely payments, it results in lack of working capital and the business owners find it difficult to fund their larger projects and as a result, lose some of the best opportunities. To help them deal with such situations and smoothly sail through the invoicing period, many of the banks and non-banking financial institutions now offer the option of bill discounting.

This is an alternative financing mode in which the lender buys the pending bills from you and instantly makes a payment against them, and later on collects the payments directly from the debtor on the date mentioned on the bill. For this process to run smoothly, the lender thoroughly checks the credit worthiness of the debtor or the corporate to which the bill has been issued, instead of the enterprise he is funding. In fact, listed below are some other benefits of bill discounting that you must know about.

• Smooth and hassle-free process – Once the businesses submit all the necessary documents, the lenders make sure that the entire process runs seamlessly and gets quickly completed. This way, the business owners get to focus on their operations without worrying or spending excessive time on the documentation process.

• Quick access to funds – Bill or invoice discounting is a financing system preferred by those businesses which require funds quickly than they are likely to get through any kind of business or personal loan. It provides the required cash as soon as an invoice is issued. This way, the small businesses are able to restore stability in their cash flow, fund the next assignment, pay the outstanding bills and manage their expansion projects.
 

• Collateral-free funding – In case of invoice discounting, the business owners do not have to pledge any asset to gain access to the necessary funds. However, a small amount of fee is deducted from the invoice payable and that is the only cost that you are asked to pay to get your bills discounted.

Eligibility criteria for bill/invoice discounting

Regardless of the nature and size of the business, everyone business owner can opt for bill discounting. However, there are certain requirements that you must fulfil in order to qualify the eligibility criteria and some of them are:

• There should be a purchase made by the customer against the sales order mentioned in the invoice.
• The contract must be supported by you and the customer, and everything should be in writing.
• You should have successfully delivered the goods to the customer, without any fault in the delivery system.
• There should be a fixed date on which the customer must pay the outstanding payment.

Conclusion

For almost every business owner, bill discounting has become one of the most dependable ways of quickly generating funds. This hassle-free funding aid does not demand any collateral to keep the business afloat in tough times and at the same time, provides maximum assistance in reducing your dependency on outstanding payments to run your everyday business operations.

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