Invoice Discounting and Factoring

Invoice Discounting is a technique many businesses will utilise when an increase in their cash flow is essential. The Invoice Discounting Facility will lend the business cash against issued invoices awaiting payment. This method is an alternative option when seeking immediate funding for business purposes.

Invoice Discounting vs. Invoice Factoring

Invoice Factoring and Invoice Discounting are often perceived as one. Both options will provide immediate cash to fund business needs, however; they do differ in some ways. Invoice factoring means the business may opt to relinquish responsibility of its collections and accounts receivable management. The funding received from the factoring provider becomes an instant asset of the business. Invoice Discounting is a confidential facility which also bridges the gap of when invoices are issued and when they are actually paid. The task of collecting outstanding payments and its administration remains the responsibility of the business owner.

Invoice Discounting may be a better option for a business seeking short-term funding. This method will enable the business to increase its cash flow and simultaneously maintain customer relations. Unlike factoring, clients are unaware of a third party involvement, which may not be appealing to customers. Factoring may be beneficial for companies attempting to reduce time spent on collections. It can potentially avoid accumulating debt and the cash obtained will become an asset. Both methods will assist with financing and increase the working capital of the business.

Invoice Discounting vs. Bank Loans

Unlike conventional bank loans and other institutional loans, the firm's credit history will not effect the funding approval. Small Businesses will find it more difficult to obtain a bank loan due to lack of lending history. The process of approval is faster with Invoice Discounting or Factoring making it a more preferred and accessible method of financing business needs.