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Factoring turns unpaid invoices into cash within days, and hands the job of collecting them to the finance provider. That second part is what separates it from invoice discounting.
Enter an invoice value, the advance and the fees from a quote and see the cash you get now and what it costs. Illustrative, free, and nothing is collected.
| Factoring | Invoice discounting | |
|---|---|---|
| Who collects | The factor runs your credit control | You keep collecting your own invoices |
| Do customers know? | Yes, they pay the factor | Usually not; it is often confidential |
| Typical user | Smaller businesses without a credit-control team | Larger businesses with established credit control |
| Cost | Higher, because collection is included | Lower service fee |
General characteristics of the two products, not any provider’s terms.
Factoring usually has two main charges. The service fee pays for running your ledger and is normally a percentage of the invoices you put through. The discount charge is interest on the money advanced, for the days it is outstanding, often expressed as a margin over Bank of England base rate. On top, check for set-up fees, minimum fee levels, charges for credit checks on new customers, and termination fees. The invoice finance calculator shows how the two main charges combine for your own figures.
With recourse factoring, if a customer does not pay, the unpaid invoice comes back to you and you repay the advance. Non-recourse factoring includes protection against a customer’s insolvency, for a higher fee. Read the definition of what is covered; non-recourse rarely protects against a customer who simply disputes the work.
Traditional factoring covers your whole sales ledger and often comes with a minimum term and notice period. Selective or single-invoice finance lets you fund individual invoices when you choose, generally at a higher price per invoice but with no long commitment.
Businesses that sell to other businesses on credit terms, with customers that are creditworthy but slow. It does not work for businesses selling to consumers, and it is harder where invoices are frequently disputed or depend on stage payments.
Products: Invoice discounting (confidential)
Products: Confidential invoice discounting, optional bad debt cover
Products: Invoice discounting, asset based lending
Products: Factoring, invoice discounting
Products: Factoring, confidential invoice discounting, sector finance (recruitment, construction)
Products: Invoice factoring, invoice discounting (confidential)
Products: Invoice finance (factoring and discounting), optional credit control and debtor protection
Products: Invoice finance (selective, pay per invoice)
Products: Invoice finance for recruitment, staffing and consultancy firms, with 95% bad debt protection on eligible invoices
Products: Invoice finance, asset based lending
10 providers, each read on its own website on the date shown. None of them publishes a headline rate; every one prices per business. “Not published” and “Priced per quote” mean exactly that: the provider does not state the figure, so we do not estimate one.
Tell us about your company and what you need. With your consent, a specialist business finance broker contacts you and does the searching. Free to use; we may be paid by the broker for the introduction.
With factoring the provider collects payment from your customers, so they know you use it. With invoice discounting you collect your own invoices and the arrangement is usually confidential.
A percentage set by the provider for your business, published where the provider publishes it in the table. The rest, less fees, is paid when your customer pays.
Yes. In factoring your customers pay the factor directly. If you need confidentiality, invoice discounting is the usual alternative.
Whole-turnover agreements often have a minimum term and a notice period, and some charge a termination fee. Check these before signing; selective invoice finance avoids a long commitment.
