Invoice financing exists to solve exactly that problem. By using unpaid invoices as the basis for a funding facility, consumer brands can access cash tied up in their sales ledger without waiting for customers to settle their accounts. According to data from Rise Funding, UK businesses used invoice finance to support roughly £313 billion of sales in 2023, with around £21.2 billion outstanding in advances by the end of 2024. It is one of the most widely used working capital tools in the UK, and yet it remains widely misunderstood.
The two most common forms are invoice factoring and invoice discounting. On the surface they look similar: both unlock cash from unpaid invoices, both charge fees based on invoice values, and both are faster to access than a traditional bank loan. But the differences between them are operationally and commercially significant. Choosing the wrong one can cost more than just fees. It can affect your customer relationships, your internal workload, and your access to the full value of what you are owed.
This article explains how each option works, what the pros and cons are, and when each one makes sense for a consumer brand. It also covers a third option that most articles in this space overlook entirely.
What Is Invoice Financing?
How does invoice financing work?
Invoice financing is an umbrella term for any facility that advances cash against the value of unpaid invoices. Rather than waiting for a customer to pay, a business works with a finance provider who advances a portion of the invoice value upfront. When the customer eventually pays, the provider releases the remainder, minus fees.
The key phrase there is "a portion." In most invoice finance products, the advance covers between 70% and 90% of the invoice value. The UK Invoice Finance Benchmark Report puts the average prepayment rate at 88% across all invoice finance products. That means up to 12% of every invoice is withheld until your customer pays, which matters if cash flow timing is tight.
Who uses invoice financing?
Invoice finance is used by B2B businesses that sell on credit terms, meaning they invoice customers and wait for payment rather than collecting cash at point of sale. For consumer brands selling into retail or wholesale channels, this is standard. Retailers routinely operate on 30 to 60 day payment terms. The Small Business Commissioner notes that private sector businesses typically establish payment terms of up to 60 days, and longer terms are common in practice. For a brand with a production lead time of several weeks and a retail payment cycle of 60 days, the cash gap can stretch to four months or more between spending and receiving.
What Is Invoice Factoring?
Invoice factoring is the more hands-off version of invoice finance, at least from the perspective of the business using it. When a consumer brand factors its invoices, it is not simply borrowing against them. It is selling them to a third-party factoring company, known as the factor.
How invoice factoring works, step by step
The process works as follows. The business raises an invoice and passes it to the factor. The factor advances a percentage of the invoice value, typically 80% to 90%, usually within 24 to 48 hours. The factor then takes over responsibility for collecting payment from the customer directly. Once the customer pays, the factor releases the remaining balance minus its fees.
Because the factor is communicating directly with the customer, the arrangement is disclosed. Customers receive a notice of assignment telling them their invoice has been transferred to a third party and that future payments should be directed accordingly.
What are the pros of invoice factoring?
The primary benefit is simplicity. Consumer brands that factor their invoices hand over the administrative burden of chasing payment. The factor manages the sales ledger, sends payment reminders, and handles collections. For a small team without a dedicated credit control function, this can free up significant time and resource.
Invoice factoring is also generally more accessible for earlier-stage businesses. The British Business Bank notes that factoring is typically available to businesses with annual sales up to £2 million and is usually easier for smaller businesses to access than invoice discounting. In non-recourse arrangements, the factor also takes on the risk of bad debt. If a customer becomes insolvent, the loss falls to the factor rather than the business, providing a degree of credit protection.
What are the cons of invoice factoring?
The cost is higher than invoice discounting. According to the UK Invoice Finance Benchmark Report, average factoring fees sit at around 1.27% of turnover, with a range of 0.99% to 3.5% depending on provider and risk profile. That is before the discount charge applied to the cash advance, which nibusinessinfo.co.uk puts at a typical range of 1.5% to 3% over base rate.
The more significant concern for many consumer brands is confidentiality. When a factor collects payment from a retailer or wholesale customer, that customer knows a third party is financing the brand's invoices. Some businesses see this as neutral, but for brands managing important retail relationships, it can create an impression of financial fragility. It is also worth noting that in recourse factoring arrangements, which are more common and cheaper, the business remains liable if the customer fails to pay. In that case, the advance must be repaid to the factor regardless of whether the invoice is ever settled.
What Is Invoice Discounting?
Invoice discounting achieves a similar outcome to factoring but through a different structure. Rather than selling invoices to a third party, the business borrows against them while retaining control of its own collections process.
How invoice discounting works, step by step
The business raises invoices as normal and sends them to customers in the usual way. The discounting provider advances a portion of the outstanding invoice value, typically 80% to 90%, against the sales ledger. The business continues to manage its own credit control, chasing payment from customers directly. When customers pay, the funds flow into a designated account managed by the discounting provider. The provider then releases the remaining balance, minus its fees.
Because the business handles collections itself and customers pay through a familiar-looking account, the arrangement is usually confidential. Customers are typically unaware that any third-party finance is in place.
What are the pros of invoice discounting?
The main advantages are cost and control. Fees are lower than factoring because the business, not the provider, carries the administrative work of collections. nibusinessinfo.co.uk puts typical fees for invoice discounting at the lower end of the 0.75% to 2.5% of turnover range. The arrangement also keeps customer relationships intact. Retailers and wholesale partners deal with the brand as normal, with no visibility of the finance facility running in the background.
For consumer brands that have invested in strong retail relationships, particularly with premium stockists or key accounts, this confidentiality can carry real commercial value.
What are the cons of invoice discounting?
The trade-off is workload and eligibility. Managing your own credit control means maintaining the internal systems and capacity to chase payments consistently. For lean teams, that is an operational commitment that should not be underestimated.
Eligibility is also a more restrictive consideration. Merchant Savvy notes that invoice discounting providers typically require a minimum annual turnover of £100,000, and in many cases up to £250,000, along with established credit control processes and a track record of trading. The British Business Bank notes that invoice discounting is more often used by established businesses with larger turnovers, though an increasing number of providers are making it available to smaller businesses.
For a consumer brand in its earlier growth stages, or one without dedicated finance resource, invoice discounting may not be accessible or practical.
Invoice Factoring vs. Invoice Discounting: The Key Differences
The decision between the two products ultimately comes down to four variables.
Control of collections. With factoring, the provider takes over your sales ledger and communicates directly with your customers. With discounting, collections remain your responsibility and the arrangement stays confidential.
Cost. Discounting is typically cheaper because you carry the administrative burden of collections. Factoring costs more because the provider does that work for you.
Confidentiality. Factoring is a disclosed arrangement. Your customers will know a third party is involved. Discounting is usually undisclosed.
Eligibility. Factoring is generally more accessible for smaller or earlier-stage businesses. Discounting typically requires a higher turnover, more established credit processes, and a longer trading history.
When does invoice factoring make sense?
Invoice factoring makes most sense when a business does not have the internal resource to manage its own collections, or when the cost of outsourcing that function is lower than the cost of doing it badly in-house. It is also the more practical option for earlier-stage consumer brands that do not yet meet the turnover thresholds for discounting. If maintaining customer confidentiality is not a priority, and the brand's retail relationships are straightforward, factoring offers a relatively frictionless route to working capital.
When does invoice discounting make sense?
Invoice discounting makes most sense when a brand has a well-run finance function, an established debtor book, and strong retail relationships it wants to protect. Brands with higher turnovers that can meet eligibility thresholds, and that want to maintain full control of their customer communications, will typically find discounting the cleaner solution. The lower fees also make it the more capital-efficient option at scale, assuming collections are managed effectively.
Is There a Better Alternative to Invoice Factoring and Discounting?
Both invoice factoring and invoice discounting solve the same underlying problem: getting access to cash locked in unpaid invoices. But they share a structural limitation that is worth understanding before committing to either.
The problem both options share: you never receive 100%
In both products, the finance provider advances only a portion of the invoice value, typically 80% to 90%. The remainder is held back until the customer pays. That means a consumer brand growing quickly through retail channels is always chasing a funding gap. If you raise £100,000 in invoices this month, you might access £88,000. The other £12,000 is unavailable until your customer settles. Across a growing sales ledger, that shortfall compounds.
There is also the question of invoice ownership. In factoring, the invoices are technically sold to the factor. The brand no longer owns those receivables, which can affect how the facility sits on the balance sheet and how lenders assess the business in other contexts.
Jonathan, founder of beauty brand Azio, described the cash cycle problem clearly. Selling into retail on 30 to 60 day payment terms, combined with a 2.5 month production lead time from his Korean suppliers, created a cash gap of up to four months between spending and receiving. For a brand trying to grow 5 to 6% per month, that kind of gap makes it structurally difficult to scale through retained cash alone. Any facility that only funds 80% to 90% of that picture still leaves meaningful exposure.
How Triffin's invoice finance works differently
Triffin's invoice finance is built on a different model. Triffin finances 100% of the invoice value, not 80% to 90%. That means consumer brands accessing the facility are not managing a residual funding gap while they wait for customers to pay.
Triffin also does not buy the invoice. Rather than a sale of receivables, Triffin's facility works as a financing arrangement. The brand retains ownership of its invoices and its customer relationships. There is no notice of assignment, no third party contacting retailers on the brand's behalf, and no change in how customers experience the relationship.
For consumer brands scaling into retail or wholesale channels, where protecting key account relationships matters, this is a structurally different proposition to both traditional factoring and discounting. The full invoice value is accessible, the customer relationship is preserved, and the facility can be used alongside Triffin's revolving credit facility for inventory or purchase order funding in one integrated solution.
If you want to understand how better cash flow strategies for scaling consumer brands can work alongside invoice finance, that is worth reading alongside this. And if you are weighing up the broader question of debt vs. equity funding, understanding how invoice finance fits into your capital structure is an important part of the picture.
The Bottom Line
Invoice factoring and invoice discounting are both legitimate tools for managing cash flow from unpaid invoices. Factoring is more accessible and hands-off but costs more and discloses the finance arrangement to customers. Discounting is cheaper and confidential but requires more internal resource and higher eligibility thresholds. Neither is universally better. The right choice depends on the size of the business, the strength of its credit control function, and the importance of maintaining customer confidentiality.
What both options share is the structural constraint of partial funding and, in the case of factoring, invoice ownership transfer. For consumer brands that want full access to the value of their invoices without selling them or involving third parties in customer communications, a different kind of facility may serve them better.
If you want to see how Triffin's approach to invoice financing for consumer brands compares to traditional factoring and discounting, you can apply in minutes and get same-day pre-approval.
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