Invoice Factoring — What It Actually Is, and What It Is Not

If your accountant has mentioned invoice factoring and it put you off, you are not alone. The word ‘factoring’ gets used loosely — sometimes as a catch-all for all types of invoice finance — and the version most business owners hear about first is not always an accurate picture of how it works in practice.

There are three distinct products in the invoice finance market: factoring, discounting, and selective invoice finance. They are meaningfully different. They suit different businesses. And the choice between them is not as complicated as it is often made to sound.

This page sets out what each one is, when each one is the right tool, the things that people get wrong about factoring specifically, and what you actually need to know before making a decision.