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TL;DR: Invoice factoring, invoice discounting, and on-demand invoice finance all help you access cash from unpaid invoices — but they work differently. Factoring is disclosed and managed externally. Discounting is confidential but requires whole-ledger commitment. On-demand invoice finance (like Fundtap) is confidential, selective, and flexible.
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 | Businesses wanting outsourced collections | Larger businesses with internal credit control | SMEs wanting flexibility and speed |
Invoice Factoring Explained
When you use invoice factoring, you sell your invoices to a factoring company. They advance you 70–90% of the invoice value and then collect payment directly from your customers. Your customers are notified that the debt has been assigned. Most factoring arrangements require whole-ledger assignment and 12–24 month contracts.
Invoice Discounting Explained
Invoice discounting is a confidential facility where you borrow against your outstanding invoices. You retain control of your sales ledger and manage your own collections. However, providers typically require minimum annual turnover ($500K+), whole-ledger assignment, and longer-term contracts.
On-Demand Invoice Finance Explained
On-demand invoice finance — as offered by Fundtap — lets you select individual invoices to fund when you need to. There is no whole-ledger requirement, no minimum turnover, and no lock-in contract. It is fully confidential, integrates with your accounting software, and funds within hours.
Which Should You Choose?
Choose factoring if you want someone else to handle collections and do not mind customers knowing. Choose discounting if you have high turnover, strong credit control, and want a large confidential facility. Choose on-demand invoice finance if you want flexibility, speed, and simplicity without committing your entire ledger.