Invoice Discounting: Meaning, Advantages & Online Solutions

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What is Invoice Discounting?

Is your cash tied up in your outstanding invoices? Giving credit to your customers for a longer period could hamper the regular cash flow of your business. With Tata Capital Invoice Discounting solutions, get early payments against your outstanding invoices. Purchase Invoice Discounting will save your business from the cash flow pressure while giving you some breathing space.

We help your business manage late payments and keep up with seasonal demands. By taking advantage of invoice discounting facility, you can ensure the growth your business deserves, and even perform well in periods of turbulent financial times.

Invoice Discounting is available from Tata Capital for vendors dealing with selected Corporates only which are approved by Tata Capital.

Invoice Discounting Charges & Interest Rates

Particulars	Invoice Discounting
Customer ROI	9.00% - 21.00%
Processing Fees	Minimum 1% of Sanctioned Amount
Stamp Duty	As per Stamp Duty Circular, Varies from State to State
Foreclosure Charges	Upto 6%

Penal Charges

(i) Default in payment of interest and/or principal amounts @ 24% p.a. on the defaulted amount
(ii) Dishonour Charges: Rs. 670/- (Rupees Six Hundred and Seventy only) for every Cheque/ Payment Instrument/ ECS Dishonour.
(iii) Non-creation/perfection of security: @ 2% on the outstanding principal amount will be charged for the period of delay in respect of delayed/non-submission of security/collateral related documents and non-perfection of security.

*Charges to be paid along with applicable Tax

Schedule of Other Charges

Description	Periodicity	Penalty Amount
Delayed/non submission of stock statement	To be submitted Quarterly by 10th of every Calendar Quarter.	Additional one time charge of Rs 20,000/- per Quarter
Delayed First Insurance cover note and non renewal of Insurance on due date	First Insurance:- within 30 days from disbursement date. Renewal : as and when due	Additional one time charge of Rs 20,000/- per financial year
Non adherence of financial covenants’ of sanction letter	At the time of Review /Renew of account	Additional one time charge of Rs 20,000/- per financial year
Documentation charges	Rs 5,000/-
Stock Audit charges	Rs 5,000/-
ROC and CERSAI filling	Rs 5,000/-
Valuation charges	As per actuals
TSR fees / Title search fees	As per actuals
Security trust fees	As per actuals

Charges to be paid along with applicable Tax

Advantages & Benefits of Invoice Discounting

Here’s why you should choose Tata Capital to avail Invoice Discounting for your business:

Improves cash flow / liquidity of your business

Monetizes receivables stuck in unpaid invoices with Corporates

Reduces dependence on Local Bank

No collateral required

Competitive Pricing – Leveraging on Corporate’s credit rating

Simple standard documentation process

How Does Invoice Discounting Work?

Invoice discounting helps businesses access funds tied up in unpaid invoices before the buyer pays. It is a practical way to improve working capital and manage day-to-day expenses without waiting for long payment cycles.

When a business issues an invoice to a buyer, it can submit it to Tata Capital for funding. Based on the invoice value and credit assessment, a percentage of the invoice amount, usually around 70% to 90%, may be advanced as immediate funding.

The business continues to manage the customer relationship and collects the payment from the buyer on the due date. Once the buyer settles the invoice, the advanced amount, along with applicable charges, is repaid to the financier.

Unlike invoice factoring, invoice discounting is usually a confidential arrangement. The buyer is not informed about the financing. This helps businesses maintain steady cash flow while continuing normal customer interactions.

Types of Invoice Discounting in India

Businesses in India can choose from different types of invoice discounting depending on their cash flow needs, buyer relationships, and financing structure. Understanding these options helps companies select an efficient solution for managing working capital.

Confidential Invoice Discounting: The financing arrangement remains private, and the buyer is not informed. The business continues to manage collections and customer communication directly.
Selective Invoice Discounting: Businesses choose specific invoices to finance instead of their entire receivables portfolio. This provides flexibility based on funding needs.
Whole Turnover Invoice Discounting: The financier funds a large portion of the company's receivables, usually covering most invoices raised to approved buyers.
Recourse Invoice Discounting: The business remains responsible for repayment if the buyer fails to settle the invoice.

Choosing the right invoice discounting structure can help businesses maintain steady cash flow and support smooth operations.

Eligibility Criteria & How to Apply Online for Invoice Discounting

Businesses seeking invoice discounting must meet certain eligibility requirements and follow a simple application process. Tata Capital offers a structured approach to help businesses access working capital against their receivables.

Eligibility Criteria

Eligible Businesses: Private limited companies, LLPs, partnership firms, and proprietorships with active operations can apply.
Business Stability: Applicants should have a stable operating history and a regular invoicing cycle with reliable buyers.
Financial Profile: Businesses must demonstrate steady revenue, sound financial records, and a satisfactory credit profile.

How to Apply Online

Submit an Application: Provide basic business details and information about the invoices to be financed.
Upload Documents: Share KYC documents, financial statements, and invoice details for evaluation.
Credit Assessment and Funding: After Tata Capital reviews the application and approves the proposal, funding is provided against eligible invoices.

Meeting these requirements can help businesses access invoice discounting and manage cash flow more efficiently.

FAQs

Invoice discounting allows businesses to receive funds against unpaid invoices while retaining responsibility for collecting payment from buyers. In factoring, the financier usually manages collections, and the buyer is notified.

Invoice discounting with Tata Capital improves business liquidity by unlocking funds tied up in unpaid invoices. It reduces reliance on traditional bank funding, requires minimal collateral, offers competitive pricing, and involves a simple documentation process.

Once the application and documents are submitted and approved, funds can often be released within a short period, depending on the credit evaluation, invoice verification, and buyer profile.

In most cases, the outstanding invoices themselves act as the primary security. However, lenders may assess the business's and buyers' credit profiles before approving funding.

At Tata Capital, invoice discounting is available for invoices raised for completed goods or services delivered to approved corporate buyers. The invoices must be valid, undisputed, and within the agreed payment terms.

Invoice discounting is usually treated as a short-term borrowing or working capital arrangement, as businesses receive funds against receivables that will be repaid once buyers settle the invoices.

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