Sales Bill Discounting

Sometimes some customers delay payments & hands out at the last minute, which puts an undue burden on small enterprises to fulfill their other business opportunities& orders. For example, Sushil Kumar, a small business owner, runs crockery manufacturing company & just delivered a large order for a supermarket. Sushil will be paid two months later, according to the sales agreement. The only problem is that he lacks the finances to fulfill the new order’s raw material requirements. Even though payment from the first order is guaranteed, he risks losing the second if he fails to produce it by the deadline. At times of crisis like this, sales bill discounting or invoice discounting services provided by Mynd Fintech come as a savior and aid a company’s future growth.

What is Sales Bill Discounting?

Sales bill discounting is a short-term facility in which individuals or business owners borrow money from banks and non-bank financial companies (NBFCs) due to delayed payments from customers who are unable to manage their cash flow. Also known as bill and invoice discounting, it is an important tool for managing and increasing a company’s working capital. Bill discounting NBFC services allow companies to unlock cash tied up in unpaid invoices. This process, often referred to as invoice discounting or discounting of bills, helps business owners improve liquidity by selling sales invoices to a third party as collateral for a loan.

How does Sales Bill Discounting work?

The borrower company submits an accounts receivable report to the sales discounting finance company at least once a month. Lenders or non-bank financial organizations (NBFCs) consider these information before selecting how much debt to lend to the borrower. The procedure of discounting a sales bill or invoice:

Goods and services trading

A small business or the borrower will offer their products or services to customers or vendors during the first part of the process.

Invoice raising

Invoices for the payments that the borrower anticipates receiving from customers or suppliers within the next ninety days are then sent out by the borrower.

Discounting of Bill 

The next step for the borrower is to visit the bank in order to either negotiate a reduction in the bills or to obtain a loan against the increased costs. The total amount of the bill is reduced after a nominal fee has been deducted. Nevertheless, Mynd Fintech is able to assist micro, small, and medium-sized enterprises (MSME) in securing discounts and loans of this kind for those businesses who are unable to go directly to big financial institutions.

Collection

During this stage, customers are required to pay the bank or non-bank financial company (NBFC) directly for the invoice that has been discounted by the due date. In this way, the borrower will be able to give back the money that they borrowed.

Eligibility Criteria for Sales bill discounting?

• An enterprise should be in operation for at least 12 months.
•  Specifying the exact date on which the unpaid payment is due.
• Age Limit (Individuals): 24-65 years of age.
• The business health should be good enough.

Documents required:

• Passport-sized photographs.
• Valid Identity Proof (Aadhar Card, PAN Card, Passport, Voters Identity Card, or Driving License).
• Bill of exchange/ Bills of Invoices. Identity Proof of the business.
• Valid Address Proof of the business – Telephone or Electricity bill, not older than 3 months
• Receipted Challan as proof of delivery/documents of ownership to goods evidencing dispatch of goods.

Advantages of Sales Bill discounting:

• When applying for a loan, collateral is one of the most crucial things to think about. However, sales bill discounting is one of the few products that lets you get cash flow immediately without putting up collateral or assets.
• It boosts the working capital and makes the cash flow better.
• Businesses can get cash right away when they get an invoice, which is far faster than alternative financing choices.
• Sales bill discounting speeds up the process of getting money since it takes too long to purchase goods or services, make a bill, wait for payment, and finally get cash.

Conclusion

Sales Bill Discounting is one of the best options compared to taking a loan from a financial institution, especially when considering the paperwork and assurances involved. The eligibility criteria required to get a bill discounting facility are not stringent, making it more accessible than traditional loans. Even the documentation process is hassle-free. Overall, bill discounting services offered by Mynd Fintech are highly beneficial, particularly for MSMEs and small-scale industries seeking short-term financial aid on zero collateral. It’s a smart move for those looking to boost cash flow through sales invoice discounting without pledging assets.

FAQs 

Q1. What is the meaning of bill discounting?

Ans. Bill discounting is the process of selling a bill of exchange to a financial institution for less than its face value before it matures.

Q2. Is bill discounting available through NBFCs?

Ans. Yes, bill discounting through NBFCs like Mynd Fintech is common and often faster than traditional banks.

Q3. What is bill discounting and how does it work?

Ans. Bill discounting is a financial solution where a business sells its unpaid invoices or bills to a bank or NBFC to get immediate cash flow.

Q4. What is the difference between invoice financing and bill discounting?

Ans. Invoice financing involves borrowing money against unpaid invoices, while bill discounting is the sale of a bill of exchange before its maturity at a discount.

Q5. Can small-scale industries apply for invoice discounting?

Ans. Yes, invoice discounting for small scale industries is available with minimal documentation and fast processing.

Q6. What documents are required to apply for bill discounting?

Ans. Common documents include identity proof, bills/invoices, proof of delivery, and business registration documents.

Q7. What is the process of bill discounting?

Ans. The bill discounting process involves selling unpaid invoices or bills to a financial institution at a discounted rate. The business gets immediate cash, while the lender collects payment from the customer on the due date. This improves cash flow without taking a loan.

Q8. How is invoice financing different from bill discounting?

Ans. Invoice financing vs bill discounting lies in ownership. In invoice financing, businesses retain invoice control but use it as collateral. In bill discounting, the lender purchases the bill at a discount and takes over collection responsibility.

Q9. What are invoice discounting deals?

Ans. Invoice discounting deals are flexible short-term funding offers from banks or NBFCs. They allow businesses to get upfront cash against pending invoices, ensuring steady working capital without long loan approval times.

Q10. What is bill discount sale?

Ans. A bill discount sale refers to a transaction where a business sells a bill of exchange to a financier at a discount before its due date to receive upfront payment.