Types of Invoice Discounting
Confidential Invoice Discounting
Confidential invoice discounting provides up 90% prepayment against your invoices with the balance payable when your customer settles the invoice. Importantly there is no disclosure on the invoices and the invoice discounting company has no involvement with your customers. The lender is at arms length and the invoice discounting facility is confidential.
Disclosed Invoice Discounting
Disclosed invoice discounting provides up to 90% prepayment against your invoices with the balance payable when your customer settles the invoice. However, there is a disclosure notice on the invoices which means that your customers are aware of a lenders involvement. Some lenders disclosed invoice discounting as they view it as a lower risk and often it may be available where confidential invoice discounting is not available. Not all lenders offer Disclosed Invoice Discounting.
Recourse Invoice Discounting
Recourse invoice discounting refers to the fact that you as the client take the risk of your customer's non-payment. The invoice discounting company will fund the invoice for a certain period of time, for example 120 days from invoice date. However, when the invoice remains unpaid after this period it will be re-assigned to you as the client and funding for that invoice will be withdrawn.
Non-recourse Invoice Discounting
Non-recourse invoice discounting means that invoices within agreed credit limits for agreed customers will be funded without recourse to you as a client. Some larger lenders will have their own credit protection policies whereas independent factoring companies will typically use a third party insurer. It is important to know under what circumstances the policy will pay.