How is Debt Factoring Different from Invoice Discounting?

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How is Debt Factoring Different from Invoice Discounting?

The lifeblood of any business is a steady flow of finances in and out of the business. It’s what we call cash flow. A healthy cash flow ensures that the enterprise has robust capital without financial constraints. However, maintaining that is challenging, especially for small businesses with budgetary restrictions. The SMEs majorly depend on the payments they receive from their clients/customers. However, most of these payments are late, creating a gap in the cash flow. You can mitigate this by leveraging business financing options like debt factoring and invoice discounting. Keep in mind that both are not the same. How are they different from each other? Let’s explore this through this article. Understanding Debt Factoring Debt factoring or factoring receivables is a business financing solution where the business owner sells the receivables ledger to a finance company or private lender, sourcing funding from the same. Understanding Invoice Discounting Invoice discounting allows enterprises to source a business line of credit by pegging it against the accounts receivables. You can source funds worth 95% of the accounts receivables. Debt Factoring VS Invoice Discounting – What’s the Difference?


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How is Debt Factoring Different from Invoice Discounting? by Broc Finance - Issuu