Factoring & Invoice Discounting - a definition

Question: Is there a difference between Factoring and Invoice Discounting?

Answer: Yes and No. Both terms have the same root definition. In these modern times, the following are more accurate definitions of factoring and invoice discounting:

Factoring - The selling of a company's accounts receivable to a third party, in order to obtain funding.
Over time it has come to mean that factors provide the following:
· Long term agreements
· Large minimum amounts
· Maintain the sales ledger and perform other administrative tasks relating to accounts receivable functions;
· Collect the accounts receivable;
· Provide bad debt protection by absorbing losses, which may arise as a result of the customer’s inability to pay.

Invoice Discounting - The selling of invoices to a third party at a percentage of their face value to obtain immediate funds. Period!

As you can see, both factors and invoice discounters offer the same basic service by providing funds to business through the purchase of A/R but today factors offer more services which may or may not be desired by clients needing funding.

At IFG, we are Invoice Discounters and require no large minimums or long term agreements. Our clients use our funding as needed. Some use us every week or month and some will only use us 5 or 6 times a year. We will even fund a qualified client once if needed. Our initial funding amounts range from about $2000 to nearly $200,000. Our discount rate is determined by how many days before we get paid by our client’s customers. There are no other fees!

As you can see, IFG offers a unique funding option which is designed to help growing, profitable businesses improve their cash flow through the Invoice Discounting service.