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Introduction to Invoice Financing
In today’s blog, we’re going to simplify Invoice Financing.
As you can tell from our previous blog, businesses use many techniques to optimize their cash flow and improve their working capital position. Some of these techniques are initiated by the supplier of goods and services, while the buyer can initiate others. Invoice finance is one such technique. Invoice Discounting refers to a collection of ways to monetize outstanding invoices. Invoice discounting is one method of invoice financing we offer through our innovative platform - CareCred.
Invoice discounting is a simple process where a seller borrows funds from financial institutions based on their outstanding invoices. This allows the sellers to take early payment in return for a discount – meaning that sellers can put their surplus cash to work and earn a risk-free return. The business gets the loan to fulfill its short-term liquidity needs, and this process eases the cash flow.
Supplier has provided FeelWell Hospital with some pharmaceuticals and is now ready to raise an invoice. However, the Med-Supplier needs the money quickly, and the 90-day payment period requested by FeelWell isn’t quick enough. So, after Med-Supplier raises the invoice for the goods, they turn to CareCred.
CareCred, powered with its underwriting engine LIRA, takes a 3-planked approach to underwrite the Invoices uploaded at CareCred. Leveraging 40+ data points covering Med-Supplier, Invoice Raised & Feelwell Hospital, the transaction is approved.
CareCred lends an amount that is almost equal to the total value of the invoices to Med-Suppliers, minus a small percentage which we can call the ‘discount.’
Once the credit period is Over, CareCred receives the full payment directly from Feel-Well Hospital.
And that’s it! You can logon to CareCred to get funding against your invoices.