Confidential invoice discounting definition

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Invoice discounting and factoring

The popularity of financing business through invoice discounting and factoring of receivables has grown significantly in the UK over the last 25 years.Invoice discounting and factoring are types of receivables financing whereby a company, sole trader or partnership, known as the client, sells (ie assigns) its book debts (or receivables) together with all related rights, to an invoice discounter or factor (each a receivables purchaser) at a discounted rate. The advantage to the client is that it enjoys a more predictable and liquid cash-flow cycle.This Practice Note:•explains the basic difference between invoice discounting and factoring•illustrates the invoice discounting and factoring process•highlights the challenges that can arise in relation to the purchase of a receivable, and•provides a brief overview of the UK-based trade association for asset based financing (including receivables finance)Distinguishing between invoice discounting and factoringBoth invoice discounting and factoring facilities involve the purchase of receivables from a client by the receivables purchaser at a discounted rate.The principal difference between the products is whether the sales ledger administration and collection functions...

Asset-based lending

Asset-based lending This Practice Note gives a brief overview of the typical financing structures adopted by UK asset-based lenders and a summary of the key English law legal issues that arise when financing receivables (commonly known as book debts) specifically in the asset-based lending market together with one or more of the following: • inventory (also referred to as stock) • plant and machinery (also referred to as equipment) • real estate, and/or • cashflow loan This Practice Note provides a brief overview of typical asset-based lending structures and key issues for consideration in relation to asset-based financing. Key features of asset-based lending Asset-based lending (ABL) is senior secured lending with the principal purpose of funding the working capital of a trading business. Funds are advanced by the lender based on the realisable value of certain classes of a borrower's assets (known as its 'borrowing base'). ABL is often event-driven, providing a borrower with flexible access to cash during a period of change such as an acquisition or...