What is invoice discounting?
Invoice discounting is probably the simplest form of invoice finance. As with all types of invoice finance, with invoice discounting you sell unpaid invoices to Century and we give you a cash advance that’s a percentage of the invoice’s value. Once your customer has paid the invoice, we pay you the remaining balance minus our fee.
Another way to look at discounting is that it’s a series of short-term business loans using invoices as security. In other words, Century knows that you’re owed the money, so will lend you most of it before your customer has actually paid you.
Invoice discounting is normally confidential (it’s sometimes called ‘confidential invoice discounting’), and you’ll continue to deal with customers yourself as normal — your customers won’t know you’re using a finance provider.
Invoice discounting example
Joe’s Business has just started a discounting facility with Century to help with cashflow, and Joe issues an invoice to his customer worth Kshs. 100,000 for work he’s already completed. Joe’s agreement with us states that the advance percentage (also known as ‘initial percentage’ or ‘prepayment percentage’) is 75% (as an example) — that means Joe is advanced Kshs. 75,000 by us as soon as the invoice is raised.
Generally, Joe would provide the invoice to us either physically or digitally after which he can receive the advance.
Joe’s customer settles the invoice a few weeks later, paying Kshs. 100,000 into a trust account controlled by Century. With confidential facilities, from the customer’s point of view it will look like they’re paying Joe directly.
We then pay Joe the remaining Kshs. 25,000, minus our fees. The fees are typically noegotiated by the client and is dependent on a variety of factors such as the amount to be advanced and the invoice payment terms (e.g. 30 days, 45 days, 60 days etc).
This is a basic example, but the same principle can be applied to invoice discounting across the whole sales ledger. Of course, there are sometimes more specific terms and conditions than the above, like maximum accounts receivable, minimum period, maximum overdue accounts, and so on.
Features of the Product
Provided that the invoice is raised for a reputable company, we are able to provide discounting services. What does the product offer you?
• Tenure of up to 90 days from invoice date and 180 days for government entities.
• No collateral required.
• Discounting of up to 80%.
With all the paperwork in order, the funds can be processed within 48 hours.
Benefits of Invoice Discounting
• Improves operating cash flows.
• Improves your business’ cash flow predictability and increases your long term borrowing capacity from us and other banks.
• As invoice discounting is essentially not borrowing but rather the sale of a receivable, it does not register as debt factoring and therefore no debt is registered on your balance sheet.
• A revolving credit line provides flexibility in adapting to your changing business cycles.
Any business that engages in credit transactions is eligible for the product. As long as there is a delivery note to show that goods were delivered and an invoice which should to be presented to Century for factoring.
We can advance amounts of up to Kshs. 3 Million, depending on the strength of your financials.
What do I need to apply?
• Copy of certificate of incorporation
• Copy of CR12
• Copy of Company PIN
• Copy of Tax Compliance Certificate
• Copy of Director’s PIN
• Copy of Director’s National ID
• Bank Account Statements (for the past 12 months)
• 3 sample invoices (for each proposed customer in the past 12 months)
If you have any more questions on this product, or would like to know more, give us a call on 0722 168721 / 0756 305132.