TL;DR: All three release cash from unpaid invoices, but differ on control and commitment. Factoring is disclosed and managed by the provider. Discounting is confidential but needs whole-ledger commitment and high turnover. On-demand invoice finance (FundTap) is confidential, selective, and has no lock-in.
Quick comparison
| Feature | Invoice factoring | Invoice discounting | On-demand invoice finance |
|---|
| Confidential | No, customers notified | Yes | Yes |
| Who manages collections | Factoring company | You | You |
| Whole-ledger required | Usually yes | Usually yes | No, select individual invoices |
| Minimum turnover | Often required | Often $500K+ | No minimums |
| Lock-in contract | Typically 12–24 months | Typically 12–24 months | No lock-in |
| Speed of setup | 1–4 weeks | 2–4 weeks | Same day |
| Speed of funding | 1–3 business days | 1–3 business days | Within hours |
| Best for | Outsourced collections | Larger firms with internal credit control | SMEs wanting flexibility and speed |
What is invoice factoring?
Invoice factoring means selling your invoices to a factoring company. They advance 70–90% of the invoice value, then collect directly from your customers, who are notified the debt has been assigned. Most factoring requires whole-ledger assignment and 12–24 month contracts.
What is invoice discounting?
Invoice discounting is a confidential facility where you borrow against outstanding invoices while keeping control of your sales ledger. You manage your own collections, but providers typically require minimum annual turnover ($500K+ ), whole-ledger assignment, and longer contracts.
What is on-demand invoice finance?
On-demand invoice finance lets you fund individual invoices when you choose. There is no whole-ledger requirement, no minimum turnover, and no lock-in. FundTap operates this model: it is confidential, integrates with Xero, MYOB and QuickBooks, and funds in hours, the median time to a first fund is 3 days from sign-up (FundTap data, 2026).
"Whole-ledger facilities make you commit every invoice to get help with one. The selective model flips that, you fund the invoice that's causing the pinch and leave the rest alone. That control is the whole point for a small business."
Shane, Head of Growth, FundTap
Which should you choose?
Choose based on how much control you want to keep:
- Factoring, if you want someone else to handle collections and don't mind customers knowing.
- Discounting, if you have high turnover, strong credit control, and want a large confidential facility.
- On-demand invoice finance, if you want flexibility, speed, and simplicity without committing your whole ledger.
FundTap's selective approach also keeps risk low: its loss rate is 0.71% (FundTap, BNZ presentation 2025), and customers rate it 5★ on Google across 117 reviews.
See how FundTap works → Rated 5★ on Google (117 reviews) · 4.9★ on the Xero App Marketplace (107 reviews).
Frequently asked questions
What is the difference between invoice finance, factoring, and discounting?
Is invoice factoring confidential?
What's the difference between invoice finance and invoice discounting?
Do I have to fund all my invoices?
Which is cheapest, factoring, discounting, or on-demand finance?
How quickly can each option fund me?
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