Factoring is seen by lenders as a safer facility than invoice discounting because a factor has a direct and disclosed relationship with your debtors. This makes it easy for the lender to verify the debtor balances that are being held as security, as well as putting them in a good position to collect in the debt if required, and so invoice discounters will seek to move you onto factoring terms if they are concerned.

In addition, lenders will also look to actively manage down their exposure by taking a more aggressive stance in disallowing debt and by placing either specific or general reserves on your account so that the percentage they have actually advanced against your total book reduces.

Most invoice discounting and factoring arrangements also have a built-in scale of charges to cover ‘collect out’ situations where they have to recover their money from a business’s debtors following its failure.