How Invoice Financing, Invoice Factoring and Invoice Discounting are different?

Besides sharing the same first name and similar use case, that’s where their similarities end. Here is their biggest difference – Invoice financing allows you to use your invoices as financial proof that you can pay the lender back on an advance. Invoice factoring involves selling your invoices to a third party whereas with Invoice discounting, your business maintains its responsibility for its own credit control processes ( such as sales ledger, payment chasing and invoice processing) and your customer would not need to know of any 3rd party involvement.?

Here is a quick lowdown:?

• Invoice Financing “businesses who choose to borrow money against the amounts due from their customers.”?

As opposed to taking up a business loan, invoice financing allows businesses to strengthen their cash flow by borrowing money based on amounts due from their customers.?

You can monetize your account receivables / unpaid invoices. Instead of waiting up to 150 days’ for payment, your business can obtain working capital from Day 1 of issuing the invoice, often within 48 hours of sending the verified invoice. When the invoice is due, your buyer makes payment, and your business will receive the balance (minus interest and fees).?

• Invoice Factoring “businesses that fund their cash flow by selling their invoices to a factoring company at a discount.”?

The differentiating factor which sets invoice factoring apart is the essential qualifying requirement – having outstanding invoices from approved and credit worthy clients and who handles customer payments.?

• Invoice Discounting “businesses who choose to maintain control over the collection of payments and their customers need not know about any 3rd party involvement”

A business owner would send an account receivable report to the finance company (at least once a month), aggregating receivables into the categories required by the lender. Then the lender uses this information to adjust the amount of debt that it is willing to loan the borrower.?

Feel free to write us at: Email: [email protected] , Call: 91 8450969138 , Whatsapp: https://wa.link/f9em28 , Website:? https://traderebootfin.com/? for all your Export Financing requirements.