Factoring is generally the most common type of IF. Its particularly useful to new start businesses as it not only allows your to advance you cash, but the finance company handle collections. In tern, its less work for you in the accounts department so you can focus on the growth of your business. That being said, it’s always worth bearing in mind that a bank might not handle your customers like you and customer collections can be a touchy matter, but it does take a huge element of risk away from the directors of new companies when they utilise a factoring facility.
Discounting is again where a lender will advance your debtor ledger, but instead it is your responsibility to chase payment of the invoices, so your customers will never know you use the facility. It is often less disruptive to businesses as it allows you to maintain a close client relationship. Typically, this type is used by more established businesses with more established clients who have good credit.