Invoice finance
What is the difference between factoring and invoice discounting?
By Chris Findlow · 21 July 2026
With factoring, the lender takes over collecting payment from your customers, so they know a funder is involved. With invoice discounting, you keep running your own credit control and, in a confidential facility, customers need not know. Factoring suits businesses that want to hand off chasing; discounting suits those that want to keep control.
Both advance cash against your unpaid invoices. The difference is who chases payment and whether your customers can see a funder is involved.
- Factoring. The funder manages credit control and collects payment from your customers directly. That takes chasing off your plate, which helps if you do not have a strong collections function, but it does mean your customers deal with the funder.
- Invoice discounting. You carry on invoicing and collecting exactly as you do now. The funding sits in the background, and with a confidential facility your customers need not know a funder is involved at all.
Which one a lender will offer depends partly on your business. Confidential discounting relies on you having solid credit control processes, because the funder is trusting you to keep collecting well, so it is more commonly offered to established businesses with good systems.
Neither is better in the abstract. If you would value handing off collections, factoring earns its keep. If you want to protect the customer relationship and keep control, discounting is usually the answer. We will talk through which fits how you actually run your ledger.
Written by
Chris Findlow
Director, FundingLinks
Director at FundingLinks with over 15 years across commercial lending, invoice finance and fintech partnerships, including senior leadership roles at Kriya. He works directly with SMEs to match them to the right lender across the whole market.
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