Invoice Discounting & Securitization
Invoice Discounting is borrowing using the receivables as collateral. The company manages their own account receivables and retains control of the relationship with their client.
In invoice discounting programmes, the finance company will allow the business to draw down a percentage of the outstanding sales invoices - usually in the region of 80%. As customers pay their invoices, and new sales, invoices are raised, the amount available to be advanced will change so that the maximum draw down remains at 80% or more of the sales ledger.
To be able to use receivables as collateral a system is needed that centralises invoice tracking across the whole company and provides an accurate and complete detailed picture of all invoices. The services and technology are now available from banks and third parties so that trade receivables can be securitized and then linked to asset-based lending.