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Give the differences between invoice discounting and factoring.

Give the differences between invoice discounting and factoring.

Answers

sharon
Invoice discounting
1.the bank has recourse to the borrower
2.the borrower keeps the debtor’s ledger
3.Chances of bad debts are high and this may increase the cost of the company of using such finance.
4.invoices act more or less as securities for a short term loan
5.the discount rate is usually low

Factoring
1.the factor has no recourse to the borrower
2.The factor takes over the debtor’s ledger.
3.The chances of bad debts are minimal and even then these are borne by the factor.
4.The invoices are sold outright to the factors and cannot act as securities for loans.
5.The discount rate is relatively high.
sharon kalunda answered the question on April 16, 2019 at 14:19

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