External Sources 2

What is invoice discounting?

Reductions offered to customers making a product or service cheaper, often applied as a percentage.

What are the advantages of invoice discounting?

• No need to repay and no interest charges.

• No loss of ownership or control.

• Reduces costs to the business so increases profit.

What are the disadvantages of invoice discounting?

• Often only available if purchases are paid in cash which affects cash flow.

What are loans?

Money borrowed from a financial institution normally for a set period of time and for a specific purpose.

What are the advantages of loans?

• Regular pre-paid repayments make planning and budgeting relatively easily.

• Ownership or control is not lost.

What are the disadvantages of loans?

• Interest is charged on amount borrowed.

• Interest rates can fluctuate.

• Interest has to be paid regardless of whether profit is made.