Invoice Discounting | Frequently asked questions on Invoice Discounting

Frequently asked questions about Invoice Discounting

Q. What is the main difference between Factoring and Invoice Discounting?

Both of these products are used primarily to improve a the cash flow of a business, however there are definite differences between them. The most significant difference being related to how the debts are recovered.

Factoring companies, in most cases, take control and responsibility for recovering the outstanding invoices and are able to use their own methods to achieve this, such as letters, e-mails, telephone calls etc. The business would normally have no contribution to how the letter or email was worded etc.

Invoice discounting on the other hand, allows an advance to be paid to the business using the invoice as collateral and full control of the collection of the monies invoiced remains with the company.

Q. Can invoice discounting be used as a long term cash flow solution?

Due to the cost implications of invoice discounting, many businesses choose to use it as a short term solution only but it is designed to continue for as long as required and as long as both parties are content with the agreement.

Q. Is invoice discounting available to businesses of all sizes?

This depends upon the invoice discounter but it is generally common practice for the discounter to require the business to have a certain level of turnover, the level of turnover required to qualify may vary depending on the discounter used.

Q. How long does it take before the advanced funds are made available?

The timescale will vary between invoice discounters but generally funds are advanced quite quickly once the contract has been agreed and signed, in some cases the advance is available as soon as 24 hours after approval. This is worth checking with the invoice discounter.

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