Invoice financing and invoice factoring tend to be used by some as interchangeable terms, but the two products have differences in both how they work, how the invoices are collected, and how you qualify for the programs.
A table highlighting some of these differences is below.
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Differences
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Invoice Financing
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Invoice Factoring
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Other names
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Invoice discounting, accounts receivable financing
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Factoring, accounts receivable factoring
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Financing structure
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You use your outstanding invoices for a loan or line of credit
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You sell your outstanding receivables to a factoring business at a discount and receive a portion of the cash upfront. You receive the rest when your client pays, minus the factoring business’s fee
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Repayment process
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You are responsible for collecting the repayment from your clients
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The factoring business is responsible for collecting the repayment from your clients
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