Factoring vs invoice discounting: which one fits your business?

Factoring and invoice discounting are the two main forms of invoice finance. Both release cash from your unpaid invoices, often within 24 to 48 hours. The difference comes down to two things: who manages your sales ledger, and how visible the arrangement is to your customers.

Invoice factoring

With factoring, the funder advances against your invoices and takes over credit control — chasing and collecting payment for you. It's usually disclosed, so customers know a finance provider is involved. Many businesses welcome this: it removes the admin of chasing and brings a professional, consistent collections process. Factoring often suits smaller or fast-growing firms that would rather outsource collections.

Invoice discounting

With discounting, you keep control of your sales ledger and continue collecting payments yourself. It's usually confidential, so customers need never know. Discounting tends to suit established businesses that already have their own credit-control function and reliable systems.

Side by side

• Credit control — Factoring: the funder chases for you. Discounting: you keep collecting.
• Confidentiality — Factoring: customers may be aware. Discounting: typically confidential.
• Admin — Factoring: less work for you. Discounting: you retain it.
• Cost — Factoring: usually a little higher for the collections service. Discounting: usually lower.
• Best for — Factoring: businesses wanting collections support. Discounting: established firms with strong systems.

Not sure which fits? Tell us how your business runs and we'll point you to the option that genuinely suits, with no obligation.