What Is Invoice Financing?

Any business can face a cash crunch at any point in time. While larger firms can seek and utilise all viable forms of solutions to run their business during a cash crunch, smaller companies don't have many options. Many financial institutions provide invoice financing as a form of acquiring working capital against their unpaid invoices.


Usually, invoice financing caters to the requirements of meeting the short-term liquidity of a company. These unpaid invoices are lying in the books of companies in the form of account receivables.

What Are The Two Types Of Invoice Financing?

Invoice Financing involves two forms of short-term models - Invoice Discounting and Invoice Factoring:

Difference Between Invoice Discounting and Invoice Factoring:

Point Of Differentiation Invoice Discounting Invoice Factoring
Recourse It is not necessary for the buyer to get recourse. The recourse may or may not be on the buyer. The buyer will always have to receive the recourse
Control of sales ledger The business which avails the service has control of the sales ledger In the case of invoice factoring, the control of the sales ledge is with the company providing the service
Confidentiality The use of this facility is completely confidential as apart from the customer whose invoice is discounted, no other customer gets to know that a company is availing the service. The customers are aware of the service being availed by the company as the service provider collects payments on behalf of the business


How Can Invoice Financing Benefit A Business?

Invoice financing is a way of acquiring working capital for your business by using its unpaid invoices. Acquiring working capital is a necessary factor to grow your business by running smooth operational functioning as it covers the following costs:

  • Payroll
  • Debt payments (principal and interest)
  • Rent
  • Possible surges in demand
  • Supplies
  • Other overhead costs
  • Taxes

In the case of invoice discounting, businesses can choose not to reveal their clients while availing the service.

Advantages Of Invoice Discounting:

Invoice discounting for businesses can assist in:

Unlocking Money By Clearing Unpaid Invoices:

  • Avail quick working capital
  • Zero collateral for consistent cash flow requirements
  • Optimal use of unpaid invoices

Fuelling Business Growth By Getting Access To Liquidity:

  • Higher number of orders due to timely payments
  • Business growth due to more sales
  • Larger fleet at disposal to complete orders

Better Management Of The Supply Chain:

  • An efficient supply chain with access to working capital at all times
  • Un-halted running of the supply chain
  • Higher customer satisfaction rate due to lesser efficiency gaps

How Does Invoice Discounting On KredX Work?

  • Vendor raises an invoice against blue-chip companies payable within 30 - 90 days
  • Post KYC and successful on-boarding, vendor uploads an unpaid invoice on the KredX platform to get financed.
  • External investors on the platform purchase these invoices
  • Funds get credited into vendor’s account in 24 - 72 hours*


What Is The Eligibility Criteria?

  • Business should be at least 10 months old
  • Business should cater to at least 2 large-scale corporates
  • CIBIL score of 620 and above
  • Business should have a minimum turnover of 25 lakhs

What Are The Documents Required?

The following documents are required for the onboarding stage

Pre-Sanction stage:

  • KYC of directors
  • CIBIL record of directors
  • Proof of address and PAN Card of company
  • Bank statement of the last 12 months
  • Books of account/audited financials
  • Sales data for the last 1 year
  • Loan Declaration

Post-Sanction stage*:

  • Board Resolution
  • Post-dated cheque
  • Tri-partite undertaking involving KredX
  • Memorandum of Association and Article of Association
  • Personal guarantee letter
  • Articles of association