Factoring and invoice discounting provide a very similar service where a business can release cash which is tied up in outstanding invoices. Although very similar there are some key differences which mainly include confidentiality and the way the credit control process works.
Typically Invoice Discounting is suited to larger business who are turning over 500k+ per annum and have a couple of years trading history, where factoring is better suited for smaller businesses or even start-ups, however this is not always the case.
1. The factoring company will control the sales ledger and collect debts
1. Your business retains control over the administration of their sales ledger
2. The factoring company will take responsibility for the collection of all the invoices
2. You remain responsible for the collection of invoices
3. Your customer will be aware that the invoices have been factored
3. Your customer will not be aware that the invoices have been discounted
4. Your customer pays the factoring company direct (some factoring facilities come without credit control)
4. Your customer pays the company as normal (through a trust account with your chosen financier)
5. You will receive up to a 90% advance on all your invoices
5. There is no printed “notice of assignment” upon each invoice issued
In short, the main two differences between factoring and discounting are that discounting is confidential and your business remains responsible for the collection of payment. Both products are perfect for businesses who are experiencing cashflow problems or are in a position where they are unsure on whether they can fulfil a potential order and grow due to the required payment terms.
If you feel your business would benefit from having a healthier cashflow Compare Factoring can talk you through how the process works and line up the best suited funders who will be able to provide you with a quote. Invoice Finance does come at a cost, but it will give a business owner peace of mind knowing that they have the cash available to meet critical payments such as wages. It is also common to pass this cost onto your customer.
Contact us on 01322 741425 to find out more.
Help Me Choose?
Invoice Finance is a perfect way to help your business manage cashflow and to remove the headache of late payers. There are a number of ways that an invoice finance facility can be structured and it can be tailored to your preferences.
Why not try our “help me choose tool” to allow us to support you in making the right decision for your business in 4 easy steps?