Invoice factoring involves selling outstanding invoices to a factor (finance company) at a discount. The factor advances 70–90% of the invoice value immediately, then collects from the debtor. The business gets immediate cash; the factor earns a fee. Recourse factoring means the business must buy back unpaid invoices.

• Factoring: factor collects from debtors directly (clients know)
• Invoice discounting: business collects — clients don't know
• Recourse vs non-recourse: who bears the risk if debtor doesn't pay?
• Concentration limits: factors limit exposure to any single debtor
• Annual turnover typically above £100,000 for most factors

Legal reference: Bills of Sale Act 1878; Financial Collateral Arrangements Regulations 2003; Consumer Credit Act (if SME)