In the last one month we have discussed Skye Bank’s loan packages for small and medium enterprises, SMEs. We discussed five of such packages which we shall highlight in this concluding part, but we first give the sixth package from the bank called INVOICE DISCOUNTING.
Typically, Invoice Discounting is a form of credit package based on the borrowers’ credit sales yet to be paid for, and the bank takes over the obligation, pay the outstanding and collect the payment from the original debtor on due date. In other words, it is the practice of using a company’s unpaid accounts receivable as collateral for a loan, which is issued by a bank. However, the amount of debt issued by the bank is less than the total amount of outstanding receivables.
For example, company ‘A’ sold goods worth N2.5 million to company ‘B’ on credit payable in three months. If company ‘A’ needs money urgently before the three months time, it can go to the bank with the transaction documents for an Invoice Discounting facility where the bank takes over the debt owed by company ‘B’, pay off company ‘A’ at N2.0 million and collect N2.5 million from company ‘B’ on the due date.
This can be done with Skye Bank’s Invoice Discounting facility. The bank says the maximum amount to be committed to this is N20 million, and the maximum tenor is 180 days (six months).
Our past discussions on Skye Bank SME Friendly Loans had covered the following: The Auto loan for business owners, Short term working capital facility, LPO Financing Facility, SME Asset Finance and Advances. You can go online to read them up from our past editions. You can also visit the bank for more details.