What is an Invoice Discounting Facility Limit?

What is an Invoice Discounting Facility Limit?

A facility limit in the context of invoice discounting is the maximum amount of funding that a business can draw against its outstanding invoices at any single point in time. Think of it as your available credit line for unlocking cash from your receivables.

At Built Float, we don't offer a one-size-fits-all facility limit. Instead, your limit is dynamically assessed and primarily based on supplier risk. This means we evaluate the creditworthiness and payment reliability of your business (the supplier) and, to some extent, the risk associated with your buyers.

Why Your Facility Limit Matters

Your facility limit dictates how much working capital you can access immediately. For example, if your facility limit is GHS 500,000, you can discount invoices until the total value of the advances you've received reaches GHS 500,000. As your customers pay their invoices, the funds become available again within your limit, allowing you to continuously draw down capital as needed.

This flexibility is crucial for managing fluctuating cash flow needs, enabling SMEs to seize opportunities, meet payroll, or cover operational expenses without delay.

How Built Float Determines Your Limit

Our approach focuses on sustainable financing. Key factors include:

• Supplier Risk Assessment: We analyse your business's financial health, track record, and operational stability. A more established and less risky supplier generally qualifies for a higher limit.
• Buyer Creditworthiness: While we focus on supplier risk, the reliability of your customers also plays a role. We look at the quality of your sales ledger.
• Invoice Value and Volume: The typical value and frequency of invoices you issue are considered to ensure the limit aligns with your business operations.

Frequently Asked Questions (FAQs)

• Q: Is the facility limit fixed once set? A: No, your facility limit is not static. It can be reviewed and potentially increased as your business grows and demonstrates a consistent, positive track record with Built Float and your buyers.

• Q: Does the limit depend solely on the value of individual invoices? A: While individual invoice values contribute to the overall calculation, the limit is more about your business's capacity to manage receivables and the underlying risk profile. It's a ceiling for your total outstanding discounted invoices.

• Q: How can I increase my facility limit? A: Consistently managing your receivables well, maintaining strong relationships with your buyers, and building a solid operational history with Built Float are key steps to increasing your facility limit.

Advanced Insights

For SMEs with a diverse and reliable customer base, the facility limit can grow significantly. This allows for greater financial agility, enabling businesses to undertake larger projects or manage seasonal demand more effectively. It's important to note that while we focus on supplier risk, a highly concentrated debtor book (where one buyer represents a large portion of your sales) might influence the limit calculation to mitigate risk.

Sources:

• Built Float Internal Policy
• General principles of trade finance risk assessment.

CTA: [Upload your invoice to get a preliminary offer and understand your potential limit]