Invoice Discounting

Definition

A form of receivables financing in which a business borrows against its outstanding invoices while retaining responsibility for credit control and collections. Unlike factoring, the borrower's customers are typically unaware of the financing arrangement (confidential invoice discounting). The lender advances a percentage of the invoice value (usually 80-90%) and charges interest until the invoice is paid. Invoice discounting is favoured by larger businesses that wish to maintain direct customer relationships.