What is invoice discounting?
Invoice discounting occurs when a Client (“the Client”) enters into an agreement with another business (“the Invoice Discounter”) in terms of which the Client cedes its book debts to the Invoice Discounter, generally on an ongoing basis, for up to 80% of its total value.
ABC factory has made shoes and has delivered them to its customer, the retail shoe shop. ABC has granted the retail shop 90 days credit but ABC factory needs its money now. Invoice bridging / Invoice Factoring / Invoice Discounting is when the bridging company advances up to 80 % of this money to ABC factory and then collects the money from the retail shop in 90 days time. The fee for the period the money was lent out is deducted from the 20 % still due to ABC factory and the difference is paid to ABC factory.
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