Invoice discounting is a way to get cash against your unpaid invoices. Instead of waiting 30 or 60 or 90 days for your customer to pay you get most of the invoice amount upfront from a finance company. When the customer pays you get the balance minus a small fee.
This guide explains what invoice discounting means and how the process works and the pros and cons. It also covers bill discounting in Mumbai and how to get started with Flexi Payment.
What Is Invoice Discounting?
Invoice discounting is a short term funding option for businesses that sell on credit. You raise an invoice on your customer. The payment is due later. Instead of waiting you sell or pledge that invoice to a finance company and receive a large part of the amount right away.
It helps you pay suppliers and salaries and rent on time. You also do not need a long loan process or equity dilution. It works well for MSMEs with long payment cycles and thin margins.
Invoice Discounting Vs Bill Discounting
In India people use both terms for almost the same thing. Both mean getting early cash against a bill or an invoice that your customer has not paid yet. The names change by bank or company. Flexi Payment offers both sales side and purchase side options.
- Sales invoice discounting: you get cash against invoices raised on your customers
- Purchase invoice discounting: you get funding to pay your own supplier invoices and pay back later. See our purchase invoice discounting service page
How The Invoice Discounting Process Works
1. Raise Your Invoice
Deliver your goods or services and raise an invoice on your customer.
2. Choose The Invoice
Pick which invoices you want to fund. You can choose one invoice or many.
3. Get Verified
The finance company checks the invoice and your customer’s payment record.
4. Receive The Advance
You receive a large part of the invoice value quickly. Many providers advance around 70% to 90% (please confirm the exact range for Flexi Payment).
5. Customer Pays
Your customer pays on the due date.
6. Balance Is Settled
The finance company deducts its fee and sends you the remaining balance.
Selective Invoice Discounting
You do not have to fund every invoice. With selective invoice discounting you choose only the invoices you want to fund. This gives you more control over cost. You can pick high value invoices or ones with long payment cycles and keep the rest as normal.
Advantages Of Invoice Discounting
Better Cash Flow
Get money in days instead of waiting for weeks. Use it for stock and payroll and growth.
No New Term Loan
It is funding against your own invoices so you do not need to apply for a regular business loan each time.
Flexible Use
Fund one invoice or many. It suits seasonal peaks when you need cash quickly.
Quick Process
The process is mostly digital and usually faster than a bank loan.
Can Stay Private
In some structures your customer is not told about the funding. Ask your provider whether this is possible for your case.
Disadvantages Of Invoice Discounting
Fee Structure
The longer your customer takes to pay the higher the cost. This can cut into your profit if your payment cycle is long.
Customer Risk
If your customer pays late you may need to repay the advance or pay extra charges. This depends on your agreement.
Not Easy For New Businesses
Startups with few invoices or customers without a payment history may find it harder to get approved.
Not For Every Invoice
Very small invoices or customers with a poor record may not be accepted.
Invoice Discounting Vs Normal Business Loan
|
Point |
Invoice Discounting |
Business Loan |
|
Based on |
Your unpaid invoices and customer’s record |
Your financials and credit score |
|
Speed |
Faster |
Slower |
|
Paperwork |
Less |
More |
|
Repayment |
Settled when customer pays |
Fixed monthly installments |
|
Use |
Short term cash gaps |
Long term needs |
Bill Discounting In Mumbai
Mumbai has a large number of traders and manufacturers and service companies that sell on credit. Many of them face payment delays. Flexi Payment is a Mumbai based company that offers bill discounting and invoice discounting for MSMEs. We keep the process simple and digital so you can get funds without running around.
- Bill discounting for traders and distributors
- Invoice discounting for manufacturers and service providers
- Support from a local team
Looking for more options? Read our invoice discounting platform guide and the working capital loans page.
What Does Invoice Discounting Cost?
The cost depends on a few things. There is no single rate for everyone.
- The invoice amount
- Number of days until your customer pays
- Your customer’s payment record
- Your total business volume
Always ask for a written quote with the discount rate and all fees. Look out for hidden charges before you sign.
Who Should Use Invoice Discounting?
- MSMEs that sell on credit to larger customers
- Manufacturers and traders with long payment cycles
- Service companies waiting on client payments
- Growing businesses that need cash for orders
How To Get Started With Flexi Payment
Share your business details and the invoices you want to fund. Our team will check them and tell you the advance amount and the fee. Once you accept the funds are sent to you and the rest is settled when your customer pays.
3. FAQs
- What is invoice discounting?
It is a way to get most of the money from your unpaid invoices early. A finance company pays you upfront and you get the balance minus a fee when your customer pays.
- How does the invoice discounting process work?
You raise an invoice and choose it for funding. The finance company verifies it and pays you an advance. Your customer pays on the due date and the balance is settled after the fee.
- What is the difference between bill discounting and invoice discounting?
In India both terms are used for almost the same thing. Both give early cash against unpaid bills or invoices.
- What is sales invoice discounting?
It is when you get funds against invoices raised on your customers.
- Can I discount only selected invoices?
Yes. With selective invoice discounting you choose which invoices to fund.
- How do I choose which invoice to discount?
Pick invoices from creditworthy customers with clear payment terms. Larger invoices or ones with long payment cycles give the most benefit.
- How fast can I get the money?
Many providers pay within one to two business days after approval. Please confirm the timeline with our team.
- What happens when my customer pays?
The advance is reconciled and the remaining balance minus the fee is sent to you.
- What are the disadvantages of invoice discounting?
The cost goes up if payment is delayed. Late customer payment can create extra charges and new businesses may find approval harder.
- Do you offer bill discounting in Mumbai?
Yes. Flexi Payment offers bill discounting and invoice discounting for MSMEs in Mumbai and across India.Follow for more detailed information..