Invoice discounting

Invoice discounting is a form of invoice finance where a business draws funds against its outstanding invoices while continuing to manage its own collections and customer relationships, with the arrangement typically kept confidential from customers rather than disclosed as it usually is under factoring. Because the business retains control of collections, invoice discounting generally suits a company with an established, well-run accounts receivable function that does not want a financier managing customer contact directly. Facilities are usually structured against the whole debtor ledger, drawing a percentage of eligible invoices up to a facility limit, with the arrangement operating much like a revolving line of credit backed by receivables rather than a one-off sale of specific invoices. Lenders assess invoice discounting against the debtor book's quality, the business's own collections track record and its financial reporting, since confidentiality relies on the financier trusting the business to manage the ledger accurately.

Related

Invoice finance · Factoring · Selective invoice finance