Spotting the Difference Between Invoice Finance and Factoring

Spotting the Difference Between Invoice Finance and Factoring

Most people assume that all business finance services are alike. This is why they can’t seem to tell the difference between invoice finance and factoring. To most, these 2 concepts are one and the same. Business Finance is here to tell us that is not the case! There are plenty of differences between these 2 services. This post is to provide a simple understanding of what varies factoring from invoice finance. Hopefully, businessmen from all across the board will be able to determine which kind of business finance service is suited to their company more, or will give them more benefits!

With factoring, the provider plays the role of managing the sales ledger, credit control, as well as chasing down the customers so that they can settle their invoices in the company. When we refer to someone as the provider, we are referring to the finance company that you approach to get financial services from.

It is entirely different with invoice finance discounting because it is still your business that controls its own sales ledger. It is also your businesses’ responsibility to chase your customers so that they can settle their invoices with your company. No other entity will do that for you.

Another notable difference between invoice financing and factoring is that of confidentiality. If you avail of factoring services, the customers will have to settle their invoices with the factoring company, and not with your business. Your customers will immediately be aware of your financial arrangement with this other company.

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When you decide to get invoice financing or invoice discounting, your clients will still be able to pay you. Unless you choose to tell your customers, they really do not have to know that a third party is involved in your financing situation.

Whatever you feel is best for your business should be the financial arrangement that you go with. However, rest assured that both kinds of services allow for pretty similar benefits. Whether you get one or the other, you will still be able to receive up to 90% the value of your outstanding invoices within 24 hours. Your cash will also be secured without you giving up other assets. Your level of available funding can also be increased easily as your turnover rate increases. Most importantly, money is easily freed up so you can deal with any cashflow problems in the business. With all these benefits available, all that’s really left to do is make the choice! With either these 2 business finance arrangements, you can’t go wrong!