Invoice Discounting

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Invoice discounting or Invoice Financing is a form of short-term borrowing often used to improve a company's cash flow. The business enters in an agreement with a finance company which will allow it to borrow a percentage of the outstanding sales invoices it has. For example, if a business has one million pounds in outstanding invoices and if the finance company is providing them with eighty percent of avail, then the company can borrow up to eight hundred thousand pounds in total. Here the invoice acts as a security against the loan/finance availed from the finance company.