Credit sales often encourage customers to increase or speed up spending, giving a competitive advantage to businesses. At the same time, it is quite common for customers to delay payments.
This deferment becomes a cause of concern for a business owner, who requires continual working capital to sustain operations. The fear of losing customers because of early payment requests and the need to maintain operations make it crucial for the business to look out for other finance sources like vendor bill discounting.
Take a quick look below to determine whether vendor bill discounting is the right option for your working capital needs!
Vendor Bill Discounting – In A Nutshell
A vendor bill discounting proves to be resourceful for a business in need of quick financing. A firm can conveniently avail a vendor bill discounting against its invoices, thereby financing its cash tied in accounts receivable.
Here, the financier extends funds at a discounted rate and charges a percentage of fees from the beneficiary. Subsequently, on the date of maturity, this business collects payments from its customers.
So, in other words, as a business owner, you can gain easy access to cash against the payment due from customers. However, it’s vital for you to check the accompanying beforehand to gauge this funding option’s merits successfully.
Benefits Of Vendor Bill Discounting
Here is the list of benefits you should know –
Some traditional finance sources require borrowers to pledge their assets, either personal or commercial, to avail loans. On the other hand, vendor bill discounting allows businesses to avail credit simply by discounting their unpaid invoices. As a result, it makes availing credit a lot more convenient for an enterprise.
Quick Access To Credit
Loan disbursement is, more often than not, an extensive and time-consuming process. Moreover, the lengthy credit approval process calls for a business to meet strict eligibility criteria and furnish a long list of documents. However, vendor bill discounting does not extend such stringent requirements and follows a simple verification process, thereby accelerating the overall processing time. In fact, some bill discounting platforms even disburses funds within 24-72 hours* of application.
Improved Cash Flow
Businesses strive to maintain a positive cash flow so that their short-term financial obligations remain unobstructed. Availing quick funds through vendor bill discounting offers a steady cash flow to an enterprise. This will allow you to pay expenses, settle debts, reinvest in the business, and create a buffer against potential financial challenges quite easily.
Releases Locked Cash
Vendor bill discounting releases cash that is tied up in customer invoices. As a result, you can convert your business’s accounts receivables into liquid cash, enabling enterprises to utilise locked-up funds quickly.
Businesses cannot constantly pester their customers to make timely payments as this puts their reputation on the line. Additionally, it gives rise to the risk of losing customers. So, by availing vendor bill discounting, an enterprise can effectively dodge such hindrances.
A financing company provides bill discounting services while focusing extensively on the confidentiality of a transaction. This allows businesses to access funds against unpaid invoices without involving their customers or suppliers. So, it becomes easier for a company to avail credit without compromising its reputation, credibility, brand loyalty, or business relations.
Boosts Overall Sales
Companies often find it daunting to sell goods on credit alongside maintaining sufficient working capital and a positive cash flow at all times. However, credit sales are vital for the sustenance and existence of a firm in the long run. Vendor bill discounting erases the associated risks of credit sales, thereby boosting an organisation’s overall sales.
Retention Of Control
By availing finance through bill discounting, a business continues to exercise its control over sales ledger. It also retains the sole right to collect due payments, manage credit terms, and negotiate further deals.
Shortens Operating Cycle
Unlike other forms of financing, vendor bill discounting stands out as a faster way to avail funds. This directly helps lower the operating cycle and allows businesses to bridge the working capital gap.
Other than these, vendor bill discounting allows a business to raise quick capital through a hassle-free experience. As a result, it facilitates business owners to have more liquid cash at hand and enables them to take care of day-to-day operations. However, to avail these benefits, make sure to pick a fintech company that extends integrated cash flow solutions at agreeable terms.
The competitive marketplace necessitates businesses to optimise their financial management. Vendor bill discounting is an efficient source of finance for companies engaged in the credit sale of goods. This immediate borrowing offers several benefits to a business, such as easy access to credit and improved cash flow. Along with these benefits, it also accelerates growth in the long run, ensuring a win-win situation for the business.