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What Is Invoice Discounting?
Invoice discounting is a confidential financing arrangement where a business borrows money against the value of its outstanding invoices. Unlike invoice factoring, the business retains full control of its sales ledger and continues collecting payments from its customers — the finance provider remains in the background.
Invoice discounting is often used by larger or more established businesses, as providers typically require a minimum turnover and strong internal credit control processes.
How Invoice Discounting Works
- You invoice your customer as normal and notify your invoice discounting provider.
- The provider advances you a percentage of the invoice value — typically 70–90%.
- You continue managing your own collections and credit control.
- When your customer pays, you repay the advance plus a fee to the discounting provider.
Because invoice discounting is confidential, your customers are unaware of the arrangement.
Invoice Discounting vs. Invoice Factoring
| Feature | Invoice Discounting | Invoice Factoring |
|---|---|---|
| Customer notification | No (confidential) | Yes (disclosed) |
| Collections management | You manage it | Finance company manages it |
| Typical eligibility | Established businesses | Broader eligibility |
| Whole-ledger requirement | Often yes | Often yes |
Invoice Discounting vs. Fundtap
Fundtap offers a modern, on-demand alternative to both invoice discounting and factoring. Like invoice discounting, your customers never know — but unlike traditional providers, there is no whole-ledger requirement, no lock-in contracts, and funds arrive within hours rather than days. You choose individual invoices and the process is fully automated through your accounting software.
Invoice discounting is a confidential financing arrangement where a business borrows against the value of outstanding invoices. Unlike factoring, the business retains control of its collections process.
Yes. Invoice discounting is typically a confidential arrangement — your customers are not notified and continue paying you as normal. Fundtap also works this way.
With invoice discounting, you manage your own collections and the arrangement is confidential. With factoring, the finance company takes over collections and typically notifies your customers.
Traditional invoice discounting providers typically require a minimum annual turnover (often $500K+) and established credit control processes. Fundtap has no minimum turnover requirement.
Invoice discounting costs include a service fee (typically 0.1–0.5% of turnover) plus an interest charge on advanced funds. Fundtap charges a single transparent fee from 4% of the invoice value.