What is invoice discounting used for?

Invoice discounting is a financial solution used by businesses to improve their cash flow by borrowing money against their accounts receivable. This method allows businesses to receive immediate cash based on the amounts they are owed by customers, which can be crucial for maintaining operations, covering expenses, or funding growth initiatives without waiting for customers to pay their invoices.

In this context, the correct answer highlights that invoice discounting provides loans based on customer amounts due. By leveraging outstanding invoices, businesses can access a portion of that money upfront, thereby smoothing out cash flow issues that may arise from delayed payments. This is particularly beneficial for businesses that experience variable income or have ongoing operational expenses that need to be met promptly.

The other options reflect different concepts. For instance, saving on operational costs relates to efficiency and cost management rather than securing financing against receivables. Selling goods directly to customers pertains to the sales process itself, while consolidating loans involves combining multiple debts into one, which does not relate specifically to invoice discounting practices.