What is Invoice Discounting?

Invoice discounting, also referred to as invoice financing, is a process by which businesses borrow money for their short term needs against the money which they will receive from their customers in the future. 

The following example helps to illustrate the flow of funds: 

1. Assume a business manufactures batteries that it then sells to automobile companies. 
2. When the business sells its products, in this case batteries, it raises an invoice to the customer. Based on the business’ understanding with its client, it will get paid ninety (90) days after delivery of the batteries to the client. 
3. The business’ capital is blocked until the client pays cash to the business – its cash went to purchase materials to build batteries, then it sold those batteries to its client, but it won’t get paid for those batteries until ninety (90) days later! Significant amounts of cash can get tied up in working capital.
4. If the business needs to start preparing for the next batch of batteries to sell to its client, and it requires additional cash rather than wait to be paid, it can approach a financing company willing to provide capital to bridge from the time of invoicing till the time of receipt of capital from its customer. 

Invoice discounting thus works in this way – a company financing invoice discounting is financing the receivables of companies. 

Tap Invest enables you, our customer, to finance the receivables of such companies and earn interest on those receivables.

For any additional queries, feel free to e-mail us at the following e-mail address: support@tapinvest.in.