Invoice Discounting is generally cheaper than a Factoring facility and here are the reasons why.

Costs for both these invoice finance products reflect the level of administration required by the asset based lender. Factoring or "Full Service Factoring" as it can be referred to is more expensive via the service fee cost element because as the product name suggests the level of administration is greater.

When a factoring facility is activated then invoices are actually sold to the factor and therefore the lender takes on responsibility for debt collection. This reduces your sales ledger administration costs, but increases the lenders and therefore costs.

However as a factoring lender will benefit from "economies of scale" or lower costs "per invoice" then fees passed on to "you" the borrower should be lower than a self managed sales ledger, but is dependent on your circumstances and customer base!