Discounting Criteria
The criteria for an invoice discounting facility differs slightly to the criteria of an invoice factoring facility. However, there are still 3 basic criteria.
- Your customer base must be other businesses. Invoice discounting companies will only lend against invoices that have been raised to other business entities and they will not consider invoices that have been raised to private individuals.
- Invoices must be raised on credit terms to your customers. In other words there must be a gap between the invoice being issued and payment being expected. An invoice discounting company will look to fund this gap.
- Importantly the invoices must be raised in arrears of the goods or service being delivered.
These 3 criteria are the same criteria as for an invoice factoring facility. However, the criteria for an invoice discounting facility are more stringent. This is because the risk to the lender is greater because they do not have as much control.
In view of this lenders will focus on your businesses audit trail, administration and credit control processes.
