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What is Invoice Discounting?
This is a specialist service only available to sound, established
companies with efficient sales ledger administration and collection
routines, and annual sales of R20 million or more, who wish to release
the money contained in their book debts.
By using Invoice Discounting the company can substantially replace
credit sales by cash sales, without compromising it's relationship
with it's customers. Invoice Discounting may just be the perfect
partner for the business. It is simple to operate and provides
a flexible source of additional working capital.
How does the system work?
Merchant Factors understands the difference between interaction
and interference. Right from the outset, we tailor-make the arrangement
that would best suit the company's requirements. This keeps the facility
flexible and simple to operate. Before concluding an agreement, we
carry out a full survey of how the business operates, in order to assess
the viability of Invoice Discounting in each particular case.
Once viability has been established, the process begins with
Merchant Factors providing the company with working capital against
invoices outstanding at the time. The business will thereafter offer
debts to us at agreed intervals, supported by copy invoices and proofs
of delivery. We will immediately make the agreed advance payment,
usually up to 75% of the invoice value. The remainder will be received
by the company following full and final payment from it's customers.
This will enable the company to maintain full control of it's sales ledger and
collection procedures.
The payments, which it receives from customers will be banked directly
into an account designated by Merchant Factors. Our figures are
then reconciled with the participating company's sales ledger figures on
a monthly basis. we will assist the business regarding the
creditworthiness of both existing and prospective customers, as well as
provide advice from our extensive debtor administration and experience
in credit control.
Increased funding:
This system often compliments existing banking facilities, and provides
immediate finance against your debtors.
Expansion without loss of equity & control:
The ability to maximize the overall capital available to the business, without
diluting ownership, may be the most important benefit of all.
What will the Cost be?
Management fee:
Our fee is normally 0.5% to 1.0% of turnover and determined by the amount of
time spent servicing the account and carrying out reconciliations.
Discount fee:
A discount (interest) fee is calculated on the amount advanced and is
normally 1.0% to 2.0% above the ruling Prime Bank Overdraft rate.
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