Factoring and Invoice Discounting
Factoring
The supplier sells his receivables in the form of invoice to the factor, who makes an advance payment of 60-85% of the receivable amount. The factor manages/collects the full amount from the buyer in due course and pays the balance amount due to the supplier after deducting his commission and charges
Invoice discounting
Is the practice of using a seller’s unpaid accounts receivable as collateral for a loan/finance. invoice discounting is a form of short-term borrowing against your outstanding invoices. It is usually used to help improve a company’s working capital and cash flow. In this scenario the seller collects the payment from the buyer and settles the payment at maturity.