Both methods involve a third party company advancing money against outstanding debtor balances – a form of asset based lending.
In factoring, the third party company takes over the entire credit control process, managing the sales ledger, chasing invoices and processing payments, meaning that your customers will be aware that you are using a factoring company.
With invoice discounting, your customers are unlikely to be aware of what is happening because you continue to manage all aspects of credit control.
The benefits of both these methods of invoice financing are that:
- Funding can be secured to reduce cash flow problems or grow the business without using other assets such as equipment or stock.
- Up to 90% of the value of unpaid invoices can be released within 24 hours.
- Funding levels increase with your turnover.
- Both methods are competitively priced.
- Useful business advice can often be obtained from factoring and invoice discounting companies.