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If you’re in this situation, you should consider invoice discounting finance. It’s typically a quicker way to raise the cash your business needs. In this article, we’ll have a look at the top 10 companies (including banks and other financial institutions) that offer this facility in Nigeria. But first, let’s find out what invoice discounting finance is.
What is Invoice Discounting Finance?Invoice discounting finance, often simply referred to as invoice discounting, is a form of short-term borrowing often used to improve a company’s working capital and cash flow. It allows businesses to draw money against their sales invoices before the customer has actually paid. Here’s a breakdown of how it works:
- Initiate the Process: Your business provides goods or services to a customer and issues an invoice.
- Submit the Invoice: You then present this invoice to a finance provider, usually a bank or specialized financing institution.
- Receive Funds: Next, the finance provider delivers a percentage of the invoice’s value to your business almost immediately. This means your business gets most of the money right away rather than waiting for the payment terms of the invoice (which could be 30, 60, or even 90 days).
- Customer Payment: Your customer pays the full invoice amount on the due date, and this money goes into the finance provider’s account.
- Remainder Payment: After deducting a fee for the service, the finance provider pays the remaining balance (the part of the invoice not initially advanced) to your business.
Top Invoice Discounting Finance Providers in NigeriaHere are 10 of the top invoice discounting finance providers in Nigeria:
First Bank of NigeriaFirst Bank offers its clients businesses up to 70% of the value of their invoices as Invoice Discounting Facility. The bank provides a maximum of ₦250 million as loans in this category. If you’re going to receive this loan, your business will need to be pre-approved by the bank. You can contact its relationship teams to help you begin the process leading up to securing the facility.
Guaranty Trust BankGT Bank offers invoice discounting finance as a short-term loan. Under this arrangement, it can give loans of up to ₦50 million, representing no more than 70% of the client business’s invoice value. The maximum tenor for this credit facility is 60 days, and monthly interest does accrue on the fund. You will need to present a number of documents when applying for this loan (you’ll find a full list on GT Bank’s website). Learn more about this product from staff at your local GT Bank branch.
First City Monument BankFCMB’s invoice discounting facility targets SMEs in the manufacturing and trade industries, as well as contractors with notable clients. You can secure a minimum of ₦500,000 in invoice discounting finance from this bank and have it paid back within 180 days. FCMB promises that its interest rate on this loan is “very competitive”.
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Finance and Commercial Services LimitedF&CSL says that its invoice discounting product is targeted at contractors that seek short-term funding. Typically, these contractors have completed projects and are awaiting payment for their work. With an invoice discounting facility from F&CSL, they can commence new projects even when pay for their previous work is still pending. Loans provided by this company range from 60% to 75% of clients’ invoice value.
Vendor CreditAs a FinTech that’s “digitizing access to credit in Nigeria”, Vendor Credit is enabling businesses to apply for and obtain financing over a digital platform, within short time spans. Its invoice-discounting product does not require any paperwork and doesn’t demand collateral or guarantors. What’s more, decisions on applications are made within 1 business day. It provides loans of up to ₦200 million in this category. All you need to do is create an account on their platform, supply some information about your business, and apply for the facility. Credite Capital This institution helps vendors and contractors plug gaps in their funding flows if they can demonstrate that they constantly do business with reputable clients. Loans are offered against the payment bills, and have a repayment period of between 45 and 60 days.
Access BankAccess Bank’s Invoice Discounting Credit Program (IDCP) supports contractors with working capital. Ideally, such contractors have completed jobs or fulfilled orders for reputable clients, and are awaiting payment for their product or service. This facility has a maximum tenure of 60 days.
Union BankUnion Bank promises that it doesn’t demand collateral from businesses applying to it for this loan type. It also says that the interest on this loan is “affordable”. The bank provides up to ₦50 million in invoice discounting finance, and expects this fund to be repaid within 90 days, “in line with invoice payment date”. You can find out more from your local Union Bank branch.
The Brook FinanceThis financial services company supplies working capital to MSMEs that have duly completed projects and have had their invoices accepted by the party for which they have done such work. Brook Finance delivers financing worth up to 70% of the value of invoices. It disburses this within 48 hours of receiving documentation from applicants if it decides that the application meets its criteria.
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Zenith BankGiven that it has millions of businesses as customers, it’s no surprise that Zenith Bank has an invoice discounting finance product. The requirements for obtaining this loan from Zenith Bank do not differ markedly from what’s requested by other financial institutions: evidence that your business is awaiting payment for a job it has done. You must also have been a customer of the bank for a while prior to applying for this loan.
Final WordsIf your business is short of cash and you need to raise funds quickly, invoice discounting finance is an option you should consider. You can get it from any of the financial institutions we’ve talked about here. Featured Image Source: Invoice Discounting
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