Factoring or discounting: how do you choose the right financing option?

The moment you decide to start a business is a crucial one because you'll have a lot to do. Entrepreneurship is full of obstacles and challenges. Success takes time, and when it does come, it's often overshadowed by other unexpected situations.

Things seem even harder when you're just getting started. Success feels far away. You put all your energy and available resources into reaching it, yet it can still feel like you're fighting a losing battle.

It really is hard to stay afloat, especially when you don't know exactly how to react. Do you often deal with delayed payment of invoices issued to business partners or customers? This issue is becoming more and more common and causes problems for all types of businesses.

That's why financing options such as factoring and discounting have become more common. The two methods are fairly similar, which can make the final decision hard. Still, there are a few important differences you should consider.

What is discounting and what does it involve?

When a supplier has set a strict due date you can't meet, you need financing fast. The same applies when buying raw materials can't be covered by the value of the finished product.

That's why you need different financing options. Once you've decided to use discounting, you should know that you'll be relying on a bank's services. That institution will purchase your receivables, but it will also charge a fee and interest.

What are the main advantages and disadvantages of discounting?

You may like the idea of being able to carry on with your work without constantly worrying about non-payment. But you should think carefully before deciding to rely on discounting services.

You can, of course, benefit from a few substantial advantages:

• you'll be free to manage your liquidity as you see fit;
• you can take advantage of other discounting operations;
• you can protect your reputation.

Still, no matter how good that may sound, you also need to keep the main obstacles in mind. So, only checks and promissory notes are accepted for the discounting process. Don't forget that you're relying on a public institution. That's why the obligations imposed on you, as well as the deadlines you have to meet, are quite strict.

To discount promissory notes or checks, they must be collected within no more than 180 days. This condition applies from the moment the bank registers and approves the discounting request.

If the party responsible for paying the receivable doesn't meet the due date, 2 scenarios apply:

1. If you have enough money in your account to cover the unpaid amount, you'll get a call from the bank. You'll be informed that the person in question has refused to pay.
2. Otherwise, you'll be notified that you must cover the unpaid amount within 30 days.

What is factoring and who is it for?

Factoring is a financial service that lets you collect the value of your invoices before the payment term agreed with your customer. The only condition is that the document must not yet have reached its due date. With this financing option, cash shortages faced by most businesses will be significantly reduced.

Such a financial service can be used across all industries. Still, the greatest need is among SMEs, which often struggle to access financing. Instant Factoring aims to help these companies keep growing. It also offers a real chance to narrow the gaps created by the overwhelming success of large companies.

How does the Instant Factoring app work?

Getting access to the services offered by Instant Factoring is extremely simple. The details involved are easy to follow. Everything moves quickly and transparently.

First, you'll need to create an account on the Instant Factoring platform.

The second step is to upload the invoice you want to collect immediately.

The process will take just a few minutes. The site's user-friendly interface will make it easy to log in and navigate.

The Instant Factoring team will review your request and send you a response within no more than 2 hours. You won't even notice how fast the time passes. If your request is approved, you'll receive the money within 24 hours, without additional requests or bureaucratic procedures.

What are the main benefits of the Instant Factoring app?

The factoring service makes the most of technology to deliver the results you need. Everything happens entirely online, so you no longer have to find the right bank to get financing.

At the same time, you won't need a huge number of documents or rigid requirements. Nothing is imposed on you in strict terms. Regular visits and endless discussions with bank representatives will no longer be hard to manage.

You're free to upload as many invoices as you want. Payment terms can be 30, 60, or 90 days, or even longer if the situation calls for it. You can quickly and transparently check your balance to make sure everything is in order.

Nothing seems easy in business. Payments are becoming harder and harder to collect, and people start looking at your business with suspicion. It gets even harder when you run a small or medium-sized company. Things move much more slowly than they do for established businesses. You don't know exactly what to do or which path to take.

It's a difficult road, but something keeps stopping you: money. No matter how much you excel in your field, money dictates what you do next. And no matter how high-quality your products and services are, what matters in the end is:

• whether you've collected payment from your customers;
• whether you'll have enough money to cover your company's costs.

Even when you try to manage things properly, obstacles can still appear and slow everything down.

Conclusions

You want to keep growing, but you're stuck trying to find a fast and effective financing option. Still, you may not be sure which one is right for you. Consider all the advantages and disadvantages of both factoring and discounting. Choose the option that best fits your business needs!