Invoice discounting and invoice factoring are both forms of invoice financing that provide solutions to short-term business cash flow challenges. Both of these financing options provide earlier access to funds that would normally be tied up in unpaid invoices.

Similarities between invoice discounting and invoice factoring

Invoice discounting and invoice factoring have a number of things in common. Both are forms of invoice financing:

  • help businesses overcome short-term cash flow by providing funds when the business needs them rather than when a customer is willing to pay for a good or service
  • provide a quick and easy cash advance, typically within 1-3 days and to the tune of 90% of the value of an outstanding invoice
  • do not require assets as security
  • have adjustable limits that increase as a business grows
  • are competitively priced

Differences between invoice discounting and invoice factoring

While these two forms of invoice financing are quite similar, there are, of course, a number of key differences. We have previously discussed invoice discounting in detail so here are the ways that invoice factoring differs:

  • Invoice factoring only offers disclosed invoice finance and thus if you choose this form of financing your customers will be informed of the invoice finance arrangement  and they will be required to settle their invoice directly to the financier rather than to you. The financier may take control of your sales ledger if you choose to use invoice factoring. If you own a small business, this will allow you to redeploy your business resources to support the growth.
  • Many invoice factoring service providers only offer whole turnover invoice finance. This may not suit you if you operate a project-based business or may want the flexibility to finance as and when need to

Improve your cash flow today

If you own a small business and are experiencing cash flow challenges, invoice financing may be the solution you’ve been looking for. Contact us today to find out how InvoiceInterchange works and how we can help you solve your short-term cash flow challenges and fund your business growth.