FAQ: What is the difference between Invoice Factoring and Invoice Discounting?
What is the difference between Invoice Factoring and Invoice Discounting?
Invoice Factoring and Invoice Discounting are both types of Debtor Finance. Both types of finance allow a business to access funds based on outstanding invoices to business customers for goods and services provided on credit terms - up to 90 per cent of the invoice is made available upon verification of the invoices, with the remaining amount (less fees) paid upon customer payment of the invoice.
Invoice Factoring is a disclosed finance facility and often includes credit management and reporting support. As a disclosed facility, customers are instructed to make invoice payments to the financier and the financier will often provide debtor management support to assist in prompt collection.
Invoice Factoring can be approved in a wide variety of business contexts, whether the balance sheet is strong or not so strong, whether the business has traded negatively or positively, and even when a business may be trading out of difficulty with creditors.
Invoice Discounting is a confidential finance facility. As a confidential facility, credit management and reporting is generally managed in-house by the approved business, and customers do not experience any change in payment procedures.
Businesses approved for Invoice Discounting have generally traded positively, have a positive net assets position and are trading without major creditor issues.
Please note that this information is of a general nature only. You should consult an accountant to obtain information specific to your situation.
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