Invoice Factoring vs Invoice Discounting: Which Is Right?
In short: With factoring, the lender runs credit control and chases your invoices, and customers can see it is in use, so it suits smaller or newer firms. Discounting is confidential and you keep credit control, suiting larger, established businesses with their own credit function. Both release up to ~90% of invoice value.
Factoring and discounting both advance cash against unpaid invoices; the difference is who collects and whether it is visible.
Factoring is a fuller service: the lender advances most of the invoice, then manages credit control and collects from your customers. It saves you the admin and suits smaller or younger businesses, but your customers know a third party is involved, and it usually costs a little more for the added service.
Invoice discounting advances the same cash but you keep credit control and collect as normal, so it is confidential to your customers. It suits larger, established firms with their own credit-control function and a track record lenders trust. CoreFi matches you to the facility and lender that fit your size, sector and customers.
Key Benefits
- Choose factoring if you want the lender to chase invoices
- Choose factoring if you are smaller or newer to invoice finance
- Choose discounting if you want it confidential to customers
- Choose discounting if you have your own credit-control team
- Both release up to ~90% of invoice value, fast
Frequently Asked Questions
Is factoring or discounting cheaper?
Discounting is usually slightly cheaper because you handle credit control yourself; factoring costs a little more for the added collections service. Exact pricing depends on your turnover, sector and customers.
Will my customers know I use invoice finance?
With factoring, yes, because the lender collects from them. With discounting it is confidential, so your customers deal with you as normal.
Which suits a small business?
Factoring often suits smaller or newer firms because the lender handles credit control and the bar to qualify is lower. As you grow you can usually move to confidential discounting.
Can I switch between them?
Yes. Many businesses start on factoring and move to discounting once they have the track record and a credit-control function lenders are comfortable with.
Related Funding Options
Invoice Finance UK
Release cash tied up in unpaid invoices. Invoice factoring and discounting for UK businesses. Advance up to 90% of invoice value within 24 hours.
Working Capital Finance UK
Working capital finance for UK businesses: revolving credit, overdraft alternatives, invoice finance and short-term loans to smooth cash flow. Free to search, whole-of-market.
Business Loan Rates UK: Indicative Costs by Product
Indicative UK business finance rates by product: unsecured loans, secured loans, bridging, asset and invoice finance. A market guide, not a quote. Get matched for your actual terms.
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Get matched with lendersCoreFi is a trading name of JG Core Ltd (Company #16218779, England & Wales). CoreFi acts as a commercial finance broker and does not provide regulated financial advice. All products described are unregulated business-to-business finance. Information on this page is for general guidance only and does not constitute a formal offer of finance. Terms, rates, and availability are subject to lender criteria and may change without notice.