Businesses looking to unlock cash tied up in receivables often confuse three very different products: assignment (selling the debt), factoring and invoice finance. They all involve receivables, but they solve different problems and cost very different amounts. Here is a clear comparison.
1. Assignment: selling the debt outright
An assignment of debt is a one-off sale. You transfer your right to collect a specific debt to a buyer for an agreed, discounted price. Once done, the debt leaves your books and the risk of non-payment passes to the buyer.
- Best for: debts that are already overdue or disputed, or customers who have stopped paying.
- Cost: the discount you accept on face value — no ongoing fees.
- Risk: transferred to the buyer; if the debtor never pays, that is no longer your problem.
2. Factoring
Factoring is an ongoing arrangement. A factor advances you a percentage (typically 70–90%) of your current, not-yet-due invoices, then collects them from your customers directly. You usually assign your whole sales ledger and the factor manages credit control.
- Best for: growing businesses with a steady flow of invoices to solvent customers who need working capital.
- Cost: a service fee plus a discount charge (interest) on the advance — ongoing.
- Risk: often stays with you (recourse factoring) unless you pay for non-recourse cover.
3. Invoice discounting (invoice finance)
Invoice discounting is similar to factoring but confidential: you borrow against your invoices while keeping control of your own credit control, and your customers need not know. It is essentially a revolving line of credit secured on your ledger.
- Best for: larger, established businesses that want funding without handing over customer relationships.
- Cost: a service fee plus interest on drawn funds.
- Risk: stays with you; you still chase your own debtors.
The key distinction: factoring and invoice finance are about funding invoices that will be paid. Assignment is about getting value from invoices that are not being paid.
Which one do you actually need?
Ask yourself one question: is the customer going to pay? If the answer is probably yes, but not yet, factoring or invoice finance bridges the gap. If the answer is no, or not without a fight, then advancing money against that invoice makes no sense — you need to sell the debt and move the risk off your desk.
➜ Sell my overdue debt from £19.90
They can work together
Many businesses use invoice finance for their healthy ledger and sell off the stubborn, aged debts that the financier will not touch. The two approaches are complementary. Finance keeps the good money flowing; assignment clears out the bad debt that would otherwise clog your balance sheet and drain your team's time.
Conclusion
Do not reach for invoice finance to solve a bad-debt problem, and do not sit on overdue invoices hoping a factor will fund them. Match the tool to the situation: finance for the payable, sale for the unpaid.
