Bill Discounting - A Comprehensive Guide
There are numerous ways to raise funds for your business and one of the most common ways is bill discounting. If you own a business and have never used bill discounting, it is time you become aware of this facility to get instant funds. Here is everything you need to know about this form of financing.
Bill discounting is basically a facility that is offered by lenders who take an order to release funds before the end of the credit period. They charge a certain amount of fee or commission for the service. You own a bill which you present to the financial institution, this institution will immediately offer funds against the bill amount and will collect the amount from the client at the time of due date of payment. The lender will receive a full amount against the same. This means whenever you make a credit sale, you can enjoy instant funds by using bill discounting.
Most businesses have credit sales and if your bill is of a high value, you will be able to get access to funds in no time. It is ideal for scenarios where the buyer purchases goods from the seller and the payment is through a letter of credit. It will allow the seller to recover an amount from an intermediary before the due date. When you have a large bill amount, you get access to funds that will help your business grow. It is a form of business vertical where the lenders are involved and they give instant access to funds for a nominal fee.
Many businesses use bill discounting as a regular activity in order to raise funds for the business. Whenever the date of payment is due, the customer will pay the money to the lenders. Once you get access to funds, the responsibility to collect money from the customer will lie on the intermediary who lent you funds. You basically receive funds on a date sooner than the due date. It is a quick and convenient method of raising funds for your business. You get immediate access to funds and you are only using your bills for the same. This means there is no additional liability or need for a collateral.
Your credit score will play a significant role in the process. If you own a business and are in need for funds but do not wish to pay a huge amount of interest on the funds, you should opt for bill discounting. Scout the market for lenders who offer the service and then approach them with your bills. The lender will get income from the fees charged for the process and you will get your money well before time. Ultimately, the buyer will make payment on the due date to the lender and the transaction will close there. If you consider the pros and cons of all the borrowing options you have, bill discounting remains one of the top options for you. The entire process is straight forward and hassle free. All you need to do is approach the lender with your bills and get immediate access to funds. You can use the funds for any purpose in the business and have your bills cleared before time.
No matter the size and type of business you own or the industry you operate in, consider bill discounting option as an ideal way going forward. Remember that high value bills will give you access to significant amount of funds and you need to carefully choose the bills that you want to discount and use for your business needs.
