Invoice Discounting

Invoice discounting is a form of short-term borrowing often used to improve a company's working capital and cash flow position.

Invoice discounting allows a business to draw money against its sales invoices before the customer has actually paid. To do this, the business borrows a percentage of the value of its sales ledger from a finance company, effectively using the unpaid sales invoices as collateral for the borrowing.

Although the end result is the same as for debt factoring (the business gets cash from its sales invoices earlier than it otherwise would) the financial arrangement is somewhat different.