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Factoring vs. Invoice Discounting
Factoring and Invoice discounting both
provide the needed cash. With Factoring you
receive a full sales ledger
service management and debt collection service
that is disclosed to the customer. In invoice
discounting the sales ledger management and collections
is your responsibility.
These funding options are available to companies
which provide a product or service on credit
terms. The purpose of this is to have
access to immediate funds, without the wait of
receiving customers payments.
Essentially, factoring
is the sale of
accounts receivable invoices to a 3rd
third party. The 3rd
third party assumes the obligation of
collecting on the invoice.
Usually,
you will receive 70% to 90% of the
invoice amount which will later be followed by an additional payment
once the invoice has been collected. |
