Factoring vs Invoice Discounting

Invoice Finance

Comparing Factoring vs Invoice Discounting options

To begin with we are often asked what are the differences between Factoring vs Invoice Discounting. The answer is quite simple and we cover the two different Invoice Finance options below.

Firstly Invoice financing is a form of borrowing extended by a lender or a bank to its Clients based on amounts due from it’s debtors. This short-term form of borrowing helps a business to improve its cash flow and reinvest in operations earlier than they could have if they had waited for customers to pay up.

Types of invoice financing options

Invoice Factoring

In general this type of arrangement allows a company to get up to 90% of the invoice value up front (less fees). Once the lender receives full payment from the debtor, the remaining balance held back is then repaid.

As part of this type of facility the lender will provide a full credit control service. This can be seen as a positive or a negative for some businesses.

Additionally with Invoice Factoring your debtors will be aware of the lenders involvement from the outset.

As Invoice Factoring includes the service of credit control this type of facility is slightly more expensive than Invoice Discounting.

Invoice Discounting

Generally this form of Invoice Finance allows a business to obtain up to 90% of its invoice value up front (less fees). Funding is provided against the sales ledger nothing else. The Business is responsibility for undertaking their own credit collections. As an established business many opt for this type of service as a credit control function is not wholly required.

The amount of fees charged by a lender depends on the turnover and credit worthiness of the sales ledger. Fees are also charged for borrowing the funds made available.

Other variations

  • Spot Factoring – Choose to finance a single invoice or debtor
  • Shadow Factoring – The lender will complete their credit control function in your business name. Your debtors will not be aware of the involvement of the lender.

How to choose the best option

Consider the following when choosing an invoice finance option.

  • The initial set up fee
  • The duration of the contract
  • How much is provided up front against the Invoice value.
  • What the borrowing fees are?


Invoice finance is excellent for companies that are growing rapidly and steadily because your turnover influences the amount you get and the flexibility that comes with it.

While many see the additional cost of Invoice Finance it can provide you with a more predictable cash flow allowing you to advance your Business.

How to apply for Invoice Finance?

Applying for Invoice Finance is very simple. Click the link below or call 0161 8211478 to speak with one of our specialists.


Finally as members of the Financial Intermediary and Broker Association you can be assured of a great service. https://www.fiba.org.uk/

Finance approval is subject to status and terms and conditions apply.



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