![]() ![]() The funding relationship is confidential. With a discounting arrangement, you essentially use your unpaid sales invoices as collateral to secure a line of credit. You don’t need to spend time chasing payments, but the invoice finance company will deal directly with your customers. With invoice factoring, you are selling your accounts receivable to the finance company. But there are several differences between these solutions. The Differences Between Discounting and Factoringīoth types of invoice finance allow you to turn your accounts receivable into a source of readily available funding. This usually means your relationship with the finance company is confidential, and your customers will be unaware that you have used the invoice to access funding.įor a more detailed look at how these two financing solutions work, read our guide How Does Debtor Finance Work. With invoice discounting, you retain the responsibility for collecting payment of the invoice. There are some key differences to factoring, including the responsibility for collecting payment from your customer. When your customer pays the invoice, you receive the remaining balance less fees. ![]() Once you submit an invoice to the finance company, they will provide up to 85% of the invoice value upfront as a cash advance. Invoice discounting works similarly to factoring. When your customer pays the invoice, you receive the remaining balance of the invoice less fees.īecause the finance company collects the invoice payment, your customer will usually be aware of the factoring agreement. Once you have submitted the invoice for factoring, the finance company takes on the responsibility of collecting payment from your customer. The terms of a factoring agreement can vary, but you can expect to receive up to 95% of the value of your unpaid invoice upfront as a cash advance. Invoice factoring is a funding solution where you effectively sell your accounts receivable to the finance company. While both of these solutions allow you to turn your outstanding invoices into an immediate cash flow boost, there are some key differences. There are two main types of invoice finance: factoring and discounting. You can get paid immediately, rather than waiting for 30+ days for your customers to pay. Invoice finance is a way for businesses to unlock the capital tied up in their outstanding invoices. In 2020, businesses were made to wait 2.9x longer to receive payment than they did in 2019. This lack of access to finance is even more apparent as late payment times have accelerated nationally. Australian SMEs have always found it challenging to qualify for funding from traditional lenders. ![]()
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