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What is meant by a discounter when referring to invoice discounting? What is the difference between a discounter and a factor? Why is invoice discounting often compared to an overdraft facility?
Thank you.
Invoice discounting is effectively selling a debt to someone else (and receiving a bit less from them than the amount of the debt). Whoever buys the debt from us is known as the discounter.
The difference from factoring is that factoring is paying someone else to collect our debts for us.
Invoice discounting is similar to having an overdraft because with invoice discounting you receive cash sooner, but receive a bit less than the amount of the debt. If you use an overdraft then again you get cash sooner (borrowed from the overdraft) but you end up with a bit less because you pay interest not he overdraft.
I do explain this in my free lectures. The lectures are a complete free course for Paper PM and cover everything needed to be able to pass the exam well.
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