Invoice Factoring vs Invoice Discounting at a Glance
| Invoice factoring | Invoice discounting | |
|---|---|---|
| Who chases payment | The lender’s credit control team | You |
| Do customers know? | Usually yes, though Bibby offers it confidentially if you prefer | Usually not: Aldermore and Bibby both offer it confidentially |
| Published maximum advance | Up to 85% (Bibby) | Up to 95% (Bibby); up to 90% across Aldermore’s invoice finance |
| How you are charged | A discount fee on the money advanced, plus a service fee | The same two charges, without the credit-control service |
| Who it suits | Smaller or newer businesses with no one to chase payment | Established businesses that already run their own credit control |
| Checked on the lenders’ own pages on 23 October 2026: Bibby factoring, Bibby invoice discounting and Aldermore invoice finance. | ||
What Is the Difference Between Factoring and Discounting?
Who Runs Credit Control
With factoring, the lender takes over your credit control; with discounting, you keep it. Almost every other difference follows from that one choice: what you pay, whether your customers find out, and who is chasing when a large invoice goes overdue.
Bibby Financial Services puts the split plainly: on factoring its credit control team “manages your sales ledger and collects payments on your behalf”, while on discounting “you maintain responsibility for collecting outstanding invoices”.
Whether Your Customers Know
Your customers usually find out with factoring: they get statements and payment requests from the lender and pay it directly. Bibby will run its factoring confidentially if you prefer, but disclosure is the norm, and it is the part of the choice we’d weigh most carefully. A client who sees a third party’s name on their remittance can read it as a sign that you are short of cash.
Discounting is built to stay out of sight. You keep chasing payment in your own name, so your customers need never learn that a funder sits behind the money.
Day to day, the work does not change. Whoever chases your overdue invoices now carries on doing it, exactly as they would with no facility in place, which is the whole appeal if your customer relationships are personal ones.
What Factoring and Discounting Have in Common
Both work the same way at the start: the lender advances most of each invoice before your customer pays (Bibby Financial Services publishes up to 85% for factoring and up to 95% for discounting, and Aldermore up to 90%), then releases the rest, minus its fees, once the customer settles.
Both charge you in the same two ways. Aldermore describes them as a service fee, which is a percentage of the invoice value, and a discount fee worked out on the money it has advanced. Both also normally cover your whole sales ledger: every invoice you raise goes to the lender, not just the ones you choose.
Unless you add bad debt protection, which Bibby and Aldermore both sell as an extra, an unpaid invoice comes back to you on either product.
You’ll find both suit B2B businesses on 30 to 90-day terms. On either facility the advance is only part of the money: the rest of each invoice, less fees, stays with the lender until your customer pays, so plan around the advance rather than the invoice total.
Factoring vs Discounting Costs
Discounting usually costs less, because it leaves out the credit-control service you pay for with factoring. Neither Bibby nor Aldermore publishes standard prices, so the size of the gap comes from your own quotes.
The saving on discounting holds only if your own collections work. Nobody else chases for you, so a business with slack credit control gets paid more slowly on discounting than it would on factoring with a capable lender, which is why we’d set any discounting quote against your collection record before taking the lower price.
You can pay less and still be worse off, because the saving comes from doing the lender’s chasing yourself. If nobody in the business has time for it, the money saved on the service is money that sits unpaid for longer.
Ask each lender to quote on the same ledger, compare the total cost, then set it against how long your customers take to pay today. If they already pay to terms because someone chases them, discounting’s lower price is real; if they don’t, factoring’s service fee is buying the chasing you are missing.
Who Can Get Each One
Factoring is open to more businesses, and it is where we’d point a smaller or newer firm first. The lender runs the collections itself and sees every payment come in, so it is not relying on your credit control to protect its money.
Discounting expects a business that already runs competent credit control and turns over more. Aldermore, for example, generally requires a minimum turnover of £750,000 for its invoice finance.
Which Should Your Business Choose?
Choose Invoice Factoring If
Lean towards factoring if nobody in the business has the time to run credit control, or if late payment is a persistent drag that steady chasing would fix. The lender does the collections, so your admin drops and your cash flow stops depending on how often you find time to chase.
What you give up is privacy. Your customers will usually deal with the lender’s team rather than yours, so factoring fits best where that disclosure is not commercially sensitive.
If your credit control is one part-time bookkeeper fitting it around payroll and VAT returns, handing the chasing to the lender frees their hours for the work only they can do.
Choose Invoice Discounting If
Choose discounting if you already run established credit control and want the arrangement kept confidential. It usually costs less than factoring, and your customers go on dealing with you and nobody else.
We’d put confidentiality first if you sell to large buyers. A procurement team that suddenly sees a third party collecting on your account can start asking questions about your finances, and that is the conversation discounting avoids.
The lower price holds only while your collections perform. If invoices start ageing because nobody has time to chase them, you are paying less for a facility that is doing less for you.
You also need enough turnover to clear the lender’s eligibility bar, and someone who will run the sales ledger every week and chase to terms. With both in place, discounting keeps the funder out of sight and your cash coming in on time.
Frequently Asked Questions
What is the main difference between invoice factoring and invoice discounting?
The core difference is who manages credit control and whether your customers know a lender is involved. With factoring, the lender takes over collections and contacts your customers directly, so the arrangement is usually disclosed. With discounting, you keep credit control and chase payment yourself, and the facility is usually confidential, so your customers never learn a funder is involved. Both advance most of each invoice upfront, so the choice comes down to who chases your customers and whether they see a lender doing it.
Which is cheaper, factoring or discounting?
Invoice discounting usually costs less, because it leaves out the credit-control service you pay for with factoring. Factoring carries a higher service charge to pay for the lender chasing your customers. That said, the discounting saving only delivers value if your own collections are effective. A business with weak credit control of its own can end up being paid more slowly on discounting than it would on factoring with a capable lender doing the chasing.
Will my customers know if I use invoice finance?
With factoring, usually yes: the lender collects payment directly, so your customers receive statements and remittance instructions from the factor and know a facility is in place. With invoice discounting, usually not: lenders such as Aldermore and Bibby Financial Services offer it as Confidential Invoice Discounting (CIDD), and you continue to chase payment yourself in your own name, so the funder stays invisible. A smaller number of disclosed discounting facilities exist, where the customer is aware but you retain credit control.
Which has easier eligibility?
Factoring is generally more accessible. It’s available to smaller and newer businesses because the lender runs the collections itself and sees every payment come in. Invoice discounting typically requires a more established track record and higher turnover (Aldermore, for example, sets a minimum turnover of £750,000 for its invoice finance), because the confidential structure relies on the business running its own credit control competently.
How we compared factoring and discounting
What we covered. We compare invoice factoring and invoice discounting in 2026: who runs credit control, disclosure, cost, eligibility, and how to choose. We don’t rely on comparison-site summaries or aggregator data.
Data sources. Advance rates, minimum turnover, fee structure and confidentiality terms were checked against lenders’ own pages (Aldermore and Bibby Financial Services) on 23 October 2026, alongside the Bank of England base rate of 3.75%. Lenders do not publish standard prices, so cost comparisons here describe how each facility is charged rather than quoting rates.
How we handle gaps. Where a figure varies by provider, we name the lender it comes from rather than give a market range, because your own quote depends on debtor quality, sector and turnover.
Update cadence. We re-verify this page regularly, and whenever lenders change their published terms. The date given under Data sources above is when we last checked the lenders’ pages. Some links on this page are affiliate links; see our editorial policy.
Regulatory note. This page is editorial content, not regulated financial advice. Commercial invoice finance to a limited company is not an FCA-regulated activity, so compare facilities and read the contract before you sign.