What is the Difference Between Factoring and Invoice Discounting?
If your business is considering invoice financing to improve cash flow, you may have come across two key options: factoring and invoice discounting. While both involve using unpaid invoices to access funds quickly, they differ in how they’re managed and the level of involvement from the finance provider.
What is Factoring?
Factoring is a type of invoice financing where the provider takes on the responsibility of managing your sales ledger and collecting payments directly from your customers. Once you issue an invoice, the finance provider advances a percentage of its value—often up to 90%.
When the customer pays the invoice, the provider releases the remaining funds, minus their fees. Customers are aware that you are using a factoring service.
What is Invoice Discounting?
Invoice discounting also allows you to access funds tied up in unpaid invoices, but with one major difference—you retain control of your sales ledger and customer relationships. Atlantic Finance advances a percentage of the invoice value, but it’s up to you to collect payments from customers as usual.
This option is typically more suited to businesses with established credit control processes and the ability to manage their own collections.
Key Features of Invoice Discounting:
- You maintain responsibility for credit control and payment collection.
- Customers are unaware that you’re using an invoice finance provider (confidential service).
- It provides greater control over customer relationships and interactions.
Both options offer fast access to working capital, so the right choice depends on your business size, resources, and priorities.
At Atlantic Finance, we offer tailored factoring and invoice discounting solutions to meet the unique needs of SMEs.
Contact us today to learn how we can help you improve cash flow and focus on growing your business.
