Considered as one of the most effective and convenient form of borrowing in the country, bill discounting is an ideal solution for businesses that need funds. It is about any payment that is to be received by the seller in the future date. If you own a business and sell goods on credit, you can apply for bill discounting whenever you are in need for funds.
What is bill discounting?
Bill discounting is a financing activity where you can get an amount in advance from the lender. You can get a discounted rate from the lender based on the value of the bill. You contribute in the form of discount that is paid to the lender. The fund is available immediately and for a short tenure. You need to identify the amount of funds you require and then choose the bill you wish to discount. No lender will provide 100% value for the bill. Hence, keep the discount factor in mind and then approach a lender. Many lenders offer a loan for an amount as high as 90% of the raised invoice and the credit period will be based on your credit worthiness.
Features of bill discounting
1. Credit evaluation: Before approving the request for bill discounting, the lender will consider your reputation in the industry and will check the repayment history, creditworthiness and financial stability. If you match their criteria, the application will be approved in no time.
2. Immediate cash: With bill discounting, you can get access to immediate cash. You can make the most of a business opportunity and improve the momentum of a business. It also gives you an option to do business without funds. When you have bills available with you, all you need to do is discount them. There is no need to approach a lender for a high interest business loan.
3. Tenure: The tenure is known as usance period and it is the period in which the bill is valid for the customers. It can vary from 3 weeks up to 3 months. You need to keep in mind that the funds are available for a short tenure.
4. Quick processing: The biggest advantage of bill discounting is that it has a quick processing and needs minimal documentation. You do not need to go through the tedious procedure of making an application and submitting documents. There is a hassle free and simple application procedure.
Process of bill discounting
• You raise bills for the goods sold on credit.
• The buyer accepts the invoice and acknowledges on paying the amount at a future date.
• In order to discount the bill, you approach a financial institution.
• The lender will check your credit worthiness.
• The lender will approve the bill and disburse the funds post deducting a fee known as a discount. It will be pre defined.
• The lender will receive funds from the buyer at a later date.
• You can use the funds for any purpose in the business.
Bill discounting is considered as an effective way of raising funds for the business. The biggest advantage of the same is that you do not need to pay high interest on the funds and you get immediate access to them. Irrespective of the purpose of borrowing, bill discounting is one of the simplest and the most preferred form of borrowing. You can use the funds for any purpose in the business without worrying about the EMI. Most businesses in the country opt for bill discounting when they need instant access to funds. Choose a reliable lender for the same and enjoy a hassle free procedure.
