Joe’s Business has just started a discounting facility with The Invoice Company to help with cashflow, and Joe issues an invoice to his customer worth £10,000 for work he’s already completed. On the other hand, invoice discounting allows you to retain autonomy over all communications and customer service. As such, they’ll chase any late payments on your behalf. With factoring, your customers might know that you're in receipt of finance because the lender will typically manage your sales ledger and credit control processes. Invoice discounting is similar to factoring, however there is one fundamental difference. Invoice discounting in banking vs invoice factoring The downside to this is that you’ll still have to chase invoices yourself, unlike invoice factoring. Invoice discounting is normally confidential (it's sometimes called 'confidential invoice discounting'), and you’ll continue to deal with customers yourself as normal - your customers won’t know you’re using a finance provider.

What is confidential invoice discounting? In other words, the lender knows that you’re owed the money, so will lend you most of it before your customer has actually paid you.

How does invoice discounting work?Īnother way to look at invoice discounting is by seeing it as a series of short-term business loans using invoices as security. It’s simple: when you invoice a customer or client, you receive a percentage of the total from the lender, providing your business with a cash flow boost. Invoice discounting enables businesses to gain instant access to cash tied up in unpaid invoices and tap into the value of their sales ledger. That’s where invoice discounting comes in. Waiting for customers to pay invoices can put a strain on small-to-medium sized businesses’ cash flow.

Example business invoice process model