Invoice discounting / factoring remains an area of rapid expansion in the commercial finance market and many businesses prefer to use a pre-agreed arrangement of borrowing against invoices issued, thus their debtor ledger to the more traditional overdraft route.
Factoring offers a full service of debt management and financing – lenders will not only advance against an invoice raised but also provide a debtor book management and collection service in-house. This is of benefit particularly to the smaller business.
Invoice Discounting (ID) is usually cheaper than factoring because debtor ledger control stays with the borrower so their clients are not necessarily aware that there is a lender involved. This provides an element of confidentiality for the business, not the case with factoring, and costs are usually cheaper with the administration picked up by the client, not the lender.
These schemes are particularly useful in funding growth and expansion because the amount of the facility will grow with the size of the debtor book. Full debtor insurance, for complete peace of mind, can also be negotiated.