Invoice Discounting Compare

Additional Useful Information

• Invoice discounting is a short-term investment, typically with payment terms ranging from 30 to 90 days.

• While invoice discounting is a regulated investment option on certain investment platforms by the regulatory authorities like SEBI and RBI, it may not be regulated on all investment platforms. Care must be taken before making the investment.

• Invoice discounting is a newer investment product, suited for sophisticated investors who are comfortable with some risk and experienced in evaluating different investment options. It requires understanding credit risk and the dynamics of short-term financing.

Returns *

• Invoice Discounting do not guarantee any returns.

• The primary component of returns for the investor is the difference between the discounted price paid and the face value of the invoice.

• Typically, Invoice Discounting can generate returns ranging from 10% to 15% per year depending on the duration for which they are held and their credit ratings.

Risk Level

• Invoice Discounting are considered medium risk investments.

• Invoice Discounting have a credit risk associated with them. This means that if the company to whom they are issuing these invoice default in their commitments, the investor can make losses on the investment.

• Invoice Discounting becomes riskier during times of economic downturn. This is because there's a higher risk that the company that have been issued the invoices won't be able to pay the interest during tough times.

Liquidity

• Invoice discounting generally offers high liquidity compared to other investment options due to its short-term nature.

• Although invoice discounting is typically short-term, there can be delays if customers take longer than expected to pay their invoices, impacting liquidity for investors. This creates some liquidity risk.

Interesting Facts

• The key risk is whether the customer will pay the invoice on time or at all. If the customer defaults, the investor may not receive the full amount. Investors should thoroughly assess the creditworthiness of the debtor (customer) before purchasing an invoice.

• The highest quality invoices on credit rating scales are commonly rated as "Triple A (AAA)” invoices. Companies up to a credit rating of “double B(BB)” are considered safe investments.

• The lowest quality invoice discounting investments are rated as " (BB and below)". These invoices are relatively riskier investments.

Tax Implications

• When investors sell their Invoice Discounting, the difference between the Sale Amount and Purchase Amount is typically called “Capital Gain” or “Capital Loss” (if sale amount is lesser than the purchase amount).

• In case of Capital Gain, this amount is to be added to the taxable income of the investor and taxes are required to be paid based on the applicable tax slab.

• There is no tax in case of “Capital Loss”.

Where To Invest

• https://www.orowealth.com/invoice-discounting/