Understanding the difference between Cash Flow Discounting and Invoice Discounting

Cash flow and invoice discounting are two different forms of financing that a business can use to access funds more quickly and easily than a traditional bank loan. There are key differences between the two types that will determine which type would be useful for your business and help you understand which option is the best fit for you.

Cash Flow Discounting

Cash flow discounting allows a business to access funds based on future cash flow projections. Simply put a business can borrow capital based on what their projected cash flow is going to be. This is especially useful for rapidly growing businesses that need a capital injection to grow but currently lack assets to borrow against, in this case, the business relies on some kind of locked-in growth such as a large contract that they have secured. Additionally, cash flow discounting works well for businesses with a steady and reliable income stream but lack physical assets which they can borrow against.

Invoice Discounting

Invoice discounting, much like the name would suggest, is based on the idea of using outstanding invoices in place of other more traditional assets with a loan structure. A business can borrow money based on what they are owed, in the form of an invoice. This is in contrast to them using a project cash flow. Invoice discounting is especially useful for businesses with large amounts of outstanding debt and lacking enough cash to cover their operational expenses.

Key Differences

Cash Flow Discounting

  • Steady and Reliable income stream
  • Typically, businesses such as retail stores and Service providers.
  • Higher fees

Invoice Discounting

  • A large number of Outstanding invoices
  • Typically, manufacturers and wholesalers.
  • Lower fees
  • Typically, considered a more secure form of financing.
Case Flow discounting is normally done at a slower pace and over a longer period than invoice discounting. This is due to the lender needing to access the previous cash flow statements of the company and either do or have their projection done before they can loan the money out as opposed to simply verifying outstanding invoices.


While both types of financing presented have their merits, the speed and ease offered by invoice discounting can work wonders to quickly create a constant cash flow for your business, allowing your operations to continue. Get your business the cashflow it needs with DiscountDesk we offer invoice discounting between R250,000 and R20,000,000.