Home / Invoice factoring vs invoice discounting
The main difference is who manages customer collections.
With invoice factoring, the provider usually manages the sales ledger and collects payment from customers as well as advancing funds against eligible invoices. Customers will normally know a provider is involved.
This may appeal if you want support with credit control. Ask how the provider communicates with customers and deals with overdue balances and disputes.
With invoice discounting, your business usually retains day-to-day sales ledger management and collections. Confidential arrangements may be available, subject to provider requirements.
Your team needs accurate records and effective credit control. Ask how customer receipts must be handled and what regular reporting the provider expects.
Both link funding to eligible unpaid invoices. Providers assess your business and customers, agree limits and advance levels, and charge for the facility. Availability can change as your ledger changes.
Neither should be assumed to remove the risk of customer non-payment. Check recourse arrangements and any separate bad-debt protection, including exclusions.
Consider your team’s resources, the importance of customer-facing collections and the information you can supply. Check whether your invoices and contracts meet the provider’s requirements.
Request a full breakdown of charges and commitments. Minimum fees, notice periods and additional charges can matter as much as a headline rate.
Who contacts customers? Is the arrangement disclosed? Which invoices are excluded? What happens when an invoice is disputed or unpaid? Are guarantees or other security required? How do I leave the facility?
Read the dedicated factoring and discounting pages, or review our cost guide.
Tell us about your business, your invoices and what you want funding to achieve.