What is Invoice Financing?

Definition: Invoice Financing

invoice factoring and receivables financing

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WHAT IS INVOICE FINANCING?

Invoice financing is similar to invoice discounting; a company uses its unpaid invoices as collateral for a loan. With invoice factoring, the company sells its unpaid invoices to a third-party lender or factoring company.

However, invoice discounting and invoice factoring are also common names for the term "invoice financing".

The primary distinction lies in the fact that with invoice financing and invoice discounting, the company bears the responsibility of collecting payments on the invoices while also maintaining ownership of the invoices. With invoice factoring, the company sells the invoice to a factoring company or lender, and ownership of the invoice(s) transfers to the factoring company or lender.


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