Purchase Invoice Discounting
Purchase Invoice Discounting
Purchase Invoice Discounting is a type of financing arrangement where a business can obtain funds by using its unpaid invoices (specifically purchase invoices) as collateral. This allows the business to receive immediate cash based on the value of the invoices before they are paid by the customer. It is a form of invoice discounting, but it specifically involves purchase invoices, which are invoices a company receives from its suppliers for goods or services.
Here's how purchase invoice discounting works:
1. Supplier Invoices: A business (the buyer) receives invoices from suppliers for goods or services that have been provided but have not yet been paid.
2. Discounting: The business approaches a finance provider or lender, who agrees to advance a percentage (typically 70% to 90%) of the value of those unpaid invoices upfront. The lender will "discount" the invoices, meaning they provide the cash based on the invoice value minus a discount or fee.
3. Repayment: Once the business receives payment from its customers (in this case, the supplier), the remaining amount owed to the lender (the advance plus fees or interest) is paid back. The business then keeps any remaining balance.
4. Fees and Interest: The finance provider charges a fee for the service, which may be based on the volume of invoices discounted, the duration of the financing, and the risk of non-payment. Interest rates can vary, but they are often tied to the duration of the discounting and the creditworthiness of the business.
Key Features of Purchase Invoice Discounting:
• Collateralized Financing: The business uses its unpaid purchase invoices as collateral to obtain financing.
• Short-Term: Typically, this type of financing is short-term, as the invoices are expected to be paid relatively quickly (usually within 30 to 90 days).
• No Need for Sale of Assets: The business does not need to sell any assets or take on unsecured debt; they simply use the invoices for financing.
• Confidential: In many cases, purchase invoice discounting is a confidential arrangement, meaning the suppliers may not be aware that the invoices are being discounted.
• Cash Flow: It helps businesses maintain better cash flow by allowing them to access funds quickly, especially when there is a delay between receiving goods or services and paying suppliers.
Benefits:
• Immediate Cash Flow: The business can access cash quickly, which can help cover operating expenses or take advantage of opportunities.
• No Need to Sell Assets: The company does not need to sell its physical assets or take on long-term debt to access cash.
• Confidentiality: Unlike factoring (another form of invoice financing), the business may not need to disclose to suppliers that their invoices have been discounted.
Drawbacks:
• Costs: The fees and interest rates can be relatively high, depending on the lender and the length of the invoice terms.
• Potential for Over-Reliance: Businesses may become reliant on this form of financing if they do not manage cash flow efficiently, leading to higher financing costs over time.
• Limited Availability: The lender may require certain conditions to qualify for invoice discounting, such as a minimum invoice value or the financial stability of the business.
1. Unsecured Business Loan- January
- Loan amount 5 Lacs to 8 Cr.
- Minimum documentation
- Online process
- Quick Sanction within 24 Hrs to 72 Hrs
- Instant disbursement
2. Loan Against Property- February
- Residencial/Commercial/Industrial/Plot/Warehouse/Institutional
- Up to 100% LTV on property market value
- Low ROI and minimum charges
- Instant eligibility check
- Balance Transfer to lower ROI and maximise LTV
- Debt consolidation
- Minimum documentation
- Online process
- Hassel free legal & technical
3. Machinery Loan- March
- New Machines/Old Machines
- Up to 80% LTV for new machine
- Old machine re-finance
- Without any other collateral
- Low ROI and minimum charges
- Instant eligibility check
- Minimum documentation
4. Working Capital – April
- 30% to 70% Property Coverage
- Best ROI with low charges
- Complete advisory to meet conduct
- CC/OD limits
- LC/ FLC
- BG/ PCFC
5. MSME/CGTMSE- May
- Up to 5 Cr unsecured CC limit
- No collateral
- Sole Banking
- High Brid LTV 200%
6. Purchase Invoice Discounting- June
- Minimum documentation
- Unsecured limit
- 60 to 90 Days credit period
- Instant payment to supplier after limit confirmation
7. Sale Bill Purchase- July
- Minimum documentation
- Unsecured limit
- 60 to 90 Days credit period
- Instant payment after limit confirmation
8. Home Loan- August
- Residencial/Plot/Construction
- Up to 75% to 90% LTV on property market value
- Low ROI and minimum charges
- Instant eligibility check
- Balance Transfer to lower ROI and maximise LTV
- Debt consolidation
- Minimum documentation
- Online process
- Hassel free legal & technical
9. Project Funding- September
- Project base tailormade funding
- Projection financials
- PSUs and private Banks
- Low ROI and Charges
- Complete advisory to meet all compliance after disbursement
10. Lease Rental Discounting- October
- Up to 95% of rental value consider for EMI
- Residencial/Commercial/Industrial/Plot/Warehouse/Institutional
- Up to 75% LTV on property market value
- Low ROI and minimum charges
- Instant eligibility check
- Balance Transfer to lower ROI and maximise LTV
- Debt consolidation
- Minimum documentation
- Online process
- Hassel free legal & technical
11. Industrial, commercial, Property- November
- Commercial/Industrial/Plot/Warehouse/Institutional/ School/Hotel
- Up to 100% LTV on property market value
- Low ROI and minimum charges
- Instant eligibility check
- Balance Transfer to lower ROI and maximise LTV
- Debt consolidation
- Minimum documentation
- Online process
- Hassel free legal & technical
12. Advisory- December
- Finance cost saving
- Reduce security cover
- Audit of Bank documentations like Sanction Letter, Declarations & agreement to avoid hidden charges and inappropriate conditions.
- Help to improve negotiating power to deal with Bank and Institutions.
- Guidance on Balance Sheet to improve credit rating for the Bank
- Tracking all compliance to be complete on time.
- Working Capital requirement assessment for future growth.
- Monthly financials review
- Tracking financial statement to avoid penal interest and SMA
- Help to reply Bank for any queries.
- Keep updating for RBI effects & benefits.