You’ve delivered the goods, the customer is happy, and the invoice is sitting in their accounts department with 30, 60, or even 90-day payment terms. Meanwhile, your own bills, salaries, and suppliers can’t wait that long.
This is one of the most common cash flow squeezes facing South African businesses, and invoice discounting is designed to relieve it.
What is invoice discounting?
Invoice discounting is a form of finance where you borrow against the value of your unpaid invoices. Instead of waiting for your customer to pay, a funder advances you a large portion of the invoice value up front. When the customer pays, the funder releases the remaining balance, less their fees.
How it works
- You invoice your customer as normal for goods or services delivered.
- You submit the invoice to your funder for approval.
- The funder advances a percentage of the invoice value, often within a short time of approval.
- Your customer pays on their usual payment terms.
- The balance is released to you, minus the funder’s fees.
Invoice discounting vs. a bank overdraft
- Funding grows with your sales. The more you invoice, the more funding you can access, which makes it flexible for growing businesses.
- It’s secured by your invoices, so you may not need to put up property or other heavy security.
- It isn’t a fixed loan. You draw funding only when you have invoices to finance.
Who is it for?
Invoice discounting tends to suit businesses that:
- Sell to other businesses or government on credit terms
- Have reliable customers but slow payment cycles
- Need steady working capital to pay suppliers, staff, and overheads
- Want to grow without waiting on late payers
Things to consider
Fees apply, so make sure you understand the total cost before committing. Funders will look closely at the quality of your customers and invoices, so having clean records and creditworthy clients helps. Ask any funder how the process works, what is advanced, and what happens if a customer pays late.
Stop waiting to get paid
If unpaid invoices are holding your business back, PG Asset Finance can help you turn them into cash. Apply Now to find out how invoice discounting could work for you.
