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Shweta Sharma owns a mid-sized packaging unit. Each month, she supplies bulk materials to her large FMCG clients. The total of Shweta’s invoices is around ₹30 lakh. But her payments often take 45 to 60 days.
Due to this, she struggles to manage salaries, raw material purchases, and vendor bills. So, Shweta decided to start using invoice discounting. She submitted her unpaid invoices on a digital platform. Within two days, Shweta received ₹25.5 lakh.
It allowed Shweta to pay her suppliers on time. Also, she grabbed a new client order worth ₹18 lakh. You might be thinking what this magical solution is. It is invoice discounting. It is becoming a key strategy in 2025 for businesses looking to manage delays in payments.
It is a form of short-term borrowing where your business gets early access to their pending payments. You do not need to wait for your customer to clear the invoice after 30 to 90 days.
You can receive up to 90% of your invoice’s value in advance from an external financier. Once your customer pays the invoice on the due date, the remaining amount will be settled after deducting charges.
Several changes in the business environment have made invoice discounting more popular:
Many buyers are now taking 60 to 90 days to settle dues.
The cost of working capital loans has increased.
Read More – 5 Smart Ways Small Businesses Can Cut Costs Without Sacrificing Quality
Digital platforms have made the process faster and easier.
No collateral is required.
Sellers maintain control of their sales and client relationships.
Step | Action |
First | Your business supplies goods or services and raises an invoice. |
Second | It is then forwarded to a platform or NBFC that offers discounting. |
Third |
Misha’s company has a ₹12,00,000 invoice raised on a reputed buyer with 60-day terms.
Description | Amount (₹) |
Invoice value | 12,00,000 |
Advance @ 85% | 10,20,000 |
Discount fee @1.4% per month x 2 months |
You can see that Misha’s business received ₹10.2 lakh immediately and ₹1.46 lakh after 60 days. And her total fee is ₹33,600.
Benefits | How Does It Help? |
Immediate funds | You do not need to wait for long credit cycles to end. |
No asset pledge | It is an unsecured facility. |
It helps you clear urgent expenses.
Supports business growth
It enables reinvestment in stock or expansion.
Protects credit score
It ensures there are no delays in vendor or bank payments.
It is generally suitable for:
Exporters facing long payment cycles
Wholesalers selling on credit
Service firms with monthly billing models
Traders working with large retail chains
The financier will verify your invoice. Then, provide an advance between 75% and 90% of the value.
Fourth | When the invoice becomes payable, the buyer transfers the amount to the financier. |
Fifth | The balance (10 to 25%) is released to your business after deducting the discounting fee. |
33,600
Final payout (remaining 15% minus fee) | 1,46,400 |
Total received by business | 11,66,400 |
Improves cash flow
*T&C Apply
Seasonal manufacturers requiring raw materials before festival orders
Feature | Range |
Advance payout | 75% to 90% |
Discounting fee | 1% to 3% per 30 days |
Credit term supported | Up to 90 days |
Invoice value eligibility | ₹50,000 to ₹5 crore |
Processing time | 1 to 2 working days |
Important checks | Description |
Client reputation | You should raise invoices only on stable and known buyers. |
Invoice age | Generally, invoices issued within the past month are preferred by lenders. |
Late payment liability | You must check if delays by buyers affect your payout. |
Service charges | You should watch out for any extra platform or processing fees. |
Larger enterprises are offering discounting support to their vendors directly through integrated digital portals.
Platforms now allow multi-lender bidding, giving better rates to sellers.
Faster KYC and GST integration are cutting down approval delays.
Export invoice discounting is expanding, thanks to better data access from e-BRC filings.
Risk underwriting is being enhanced using AI-free decisioning systems.
Risks To Watch
If your client disputes the invoice then your financier might recall the advance.
If you will overuse discounting without reviewing the cost then it could hurt your margins.
Some platforms deduct GST upfront. You should look out for this as it could impact your monthly tax reconciliation.
Nowadays, invoice discounting has become more than just a backup option. It stands as a practical and efficient way for your business to free up funds stuck in unpaid invoices. Digital platforms have made the process quicker and more straightforward.
Also Read - Effective Ways to Use a Business Loan for Cash Flow Management
This makes it perfectly suitable for your firm with regular or seasonal cash flow gaps. It can help your business stay on track even when payments are delayed, ensuring smooth day-to-day operations.
1. Can startups use this facility?
Yes, especially if their buyers are well-rated corporations.
2. Are all invoices accepted?
Only recent, undisputed, and genuine invoices are considered.
3. What if my client doesn’t pay on time?
You may need to settle the amount or pay additional charges.
4. Will my client know I have discounted the invoice?
In some cases, yes. In confidential models, no.
