Invoice factoring and discounting are both cash flow solutions designed to free tied up funds for companies. These types of asset based lending offers an easy way to get cash out of unpaid invoices
Invoice factoring is a cash advance product which a business can effectively sell its ownership of specified invoices to a direct lender in return for up to 95% of the invoiced amount being paid to you within 24 hours. The real benefits of factoring are that a company can access cash much more quickly than they otherwise would if they were obliged to wait until a debtor settled the amounts due.
Invoice Discounting has essentially the same benefits as invoice factoring and involves most of the same features but it is a confidential process. The clients being issued the relevant invoices are not informed that your company is outsourcing payment collection. For some companies this confidentiality is seen as an important gain and therefore they will prefer discounting to factoring.