Invoice Discounting in Karnataka

Question 1

What is invoice discounting and how does it benefit my business?

Answer

Invoice discounting is a receivables financing solution where a business sells its unpaid invoices to Oxyzo in exchange for immediate cash. This allows businesses to unlock working capital tied up in outstanding receivables without waiting for customers to pay. The key benefits include improved cash flow, no collateral requirement, and the ability to take on more business orders without being constrained by slow payment cycles.

Question 2

What is the eligibility criteria for invoice discounting at Oxyzo?

Answer

To be eligible for invoice discounting at Oxyzo, a business must have a minimum annual turnover of Rs 3 crores and at least 3 years of business operation. Eligible entity types include Public Limited, Private Limited, Sole Proprietorship, and Partnership firms. The invoices being discounted should be backed by genuine trade transactions with creditworthy buyers.

Question 3

What is the maximum limit offered for invoice discounting?

Answer

The credit limit under invoice discounting is determined individually, based on the applicant's invoice volume, buyer creditworthiness, and Oxyzo's credit assessment. Unsecured limits can go up to Rs 5 crores for eligible businesses. Higher limits may be sanctioned for strong credit profiles or businesses with established buyer relationships.

Question 4

What is an escrow account and how is it used in invoice discounting?

Answer

An escrow account is a neutral third-party account held by the lender that holds funds during a transaction until conditions are met. In invoice discounting, the borrower's buyers are directed to deposit payments into this escrow account. This gives Oxyzo a first right of withdrawal on incoming payments, ensuring repayment security while the business gets upfront liquidity.

Question 5

What interest rate is charged on invoice discounting?

Answer

Invoice discounting at Oxyzo starts from 12% per annum, charged only on the funds utilized and for the actual number of days the invoice remains outstanding. Processing fees start from 1% per annum. There are no hidden charges, and since this is a revolving facility, the business only pays for what it actually uses.

Question 6

What are the documents needed to apply for invoice discounting?

Answer

Businesses applying for invoice discounting need: KYC documents (PAN and Aadhaar), GSTIN, last 6 months of bank statements, GSTR details for the current financial year, audited financial statements for the last 3 years, and copies of the invoices to be discounted. The application is 100% online and approval typically happens within 48 hours.

Question 7

What is the difference between invoice discounting and invoice factoring?

Answer

Invoice discounting and invoice factoring are both receivables financing tools, but they differ in control and confidentiality. In invoice discounting, the business retains control of its sales ledger and continues to collect payments from buyers -- the lender's involvement is typically not disclosed to the buyer. In factoring, the lender (factor) takes over the debtor ledger, contacts buyers directly for collection, and the arrangement is often disclosed. Oxyzo's invoice discounting is a confidential facility where the business maintains its buyer relationships and collections process.

Question 8

Can I choose which invoices to discount, or must I discount all of them?

Answer

With Oxyzo's invoice discounting facility, you have flexibility to select which invoices you want to discount based on your immediate cash flow needs. You are not required to discount every invoice you raise -- you can pick invoices selectively, for example from specific buyers or in months when your receivables cycle is longer. This selective discounting approach is more cost-effective since you only pay interest on the invoices actually financed, rather than committing your entire debtor book.

Question 9

What happens if a buyer fails to pay the discounted invoice on time?

Answer

In Oxyzo's invoice discounting structure, the SME (borrower) typically retains the credit risk of the buyer -- meaning if a buyer fails to pay, the SME remains responsible for repaying Oxyzo. This is called 'recourse' invoice discounting. The escrow account mechanism provides Oxyzo with a first right of recovery on incoming payments. To avoid complications, it is advisable to discount invoices only against creditworthy, established buyers with a reliable payment history.

Question 10

How is invoice discounting different from a working capital term loan?

Answer

The fundamental difference is the basis of the credit. Invoice discounting is asset-backed finance -- the credit is extended against specific, identifiable receivables (your raised invoices), and repayment naturally occurs when buyers pay. A working capital term loan is cash-flow-based finance -- you receive a lump sum and repay in fixed EMIs regardless of your invoice collections. Invoice discounting is self-liquidating and more aligned to your actual business rhythm, while a term loan provides a fixed cash injection with a fixed repayment schedule.

Question 11

Is invoice discounting suitable for businesses with long payment cycles (90+ days)?

Answer

Yes -- invoice discounting is particularly well-suited for businesses with long buyer payment cycles of 60, 90, or even 120+ days. Industries such as manufacturing, export, infrastructure, pharmaceuticals, and FMCG distribution often have extended payment terms with large buyers. By discounting invoices immediately after delivery, these businesses can convert long-dated receivables into same-day cash, maintain steady operations, and avoid the cost of alternative high-interest short-term borrowing.

Invoice Discounting in Karnataka

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Invoice Discounting Benefits

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Improve cash flow

No collateral required

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