Invoice Discounting vs. Invoice Factoring

At Underrated Capital, we help UK businesses secure the right invoice finance solution, whether that’s borrowing against unpaid invoices or selling them outright to a third party. Here’s how the two main options work:

Invoice Discounting

With invoice discounting, a finance provider advances you up to 90% of the invoice value once it’s verified with your customer, giving you quick access to funds without waiting for payment.
Your team remains responsible for collecting payment, but the process is kept confidential. Clients pay into a trust account set up in your company’s name, and once the invoice is settled, you’ll receive the remaining balance minus the provider’s fee.

Invoice Factoring

With invoice factoring, the finance company pays you most of the invoice value immediately (less their service fee) and takes over the responsibility of collecting payment from your customers.
When the invoice is paid in full, you receive the remaining balance. This hands-off approach is ideal for smaller businesses without the time or resources to manage credit control internally.