Choosing Between Recourse Factoring and Disclosed Invoice Discounting for Seasonal Growth
Seasonal peaks are both exciting and challenging. Recruitment agencies expand their temporary workforce, logistics firms hire additional drivers, and manufacturers add shifts to meet demand. Yet whilst sales climb, cash flow can quickly become strained. Wages, fuel, equipment, and supplier costs all need to be paid, while customer invoices may not be settled for weeks.
This is where invoice finance comes into action. By unlocking the value of unpaid invoices, businesses can bridge the gap between rising costs and delayed payments. But one decision often arises: choosing between recourse factoring and disclosed invoice discounting. Both provide access to working capital, but they operate differently. Understanding these differences is key to selecting the right option for seasonal growth.
What is Recourse Factoring
Recourse factoring (sometimes called debt factoring or invoice factoring). Is a funding solution where an invoice finance provider advances a percentage (typically up to 80%) of your outstanding invoices.
The provider then manages credit control and debtor chasing on your behalf. This means they issue statements, follow up on overdue invoices, and handle payment queries. It is outsourced credit control, which frees up your team to focus on operations rather than collections.
For businesses managing seasonal recruitment, invoice factoring is valuable because:
- Payroll is met on time, even if invoices remain unpaid.
- Professional debtor management improves the likelihood of faster payment.
- It reduces the administrative burden at a time when staff are stretched.
What is Disclosed Invoice Discounting
Disclosed invoice discounting, is another form of invoice finance. Like factoring, it provides an advance against unpaid invoices, often up to 80% within 24 – 48 hours.
The difference is control. With invoice discounting, your business retains responsibility for sales ledger management and credit control. Customers continue to deal with you directly, and you chase outstanding invoices in-house.
- For businesses with strong financial teams, this option offers:
- Greater control over customer relationships.
- Flexibility in how you manage outstanding invoices.
- Funding that grows in line with seasonal turnover.
Choosing Between Invoice Factoring and Invoice Discounting
The decision often comes down to two factors: control and capacity.
Recourse factoring is suited to businesses that want to save time, improve debtor management, and ensure professional credit control during peak periods. It is especially valuable when seasonal recruitment leaves internal teams overstretched.
Invoice discounting is better for businesses with established credit management processes, who prefer to maintain customer contact but still want fast access to the amount of cash tied up in unpaid invoices.
Both options are provided by invoice financing companies and are designed to support cash flow solutions for SMEs during periods of rapid growth.
How Seasonal Growth Shapes the Choice
Seasonal recruitment brings unique challenges that affect working capital management:
Rising short term liabilities: Staff wages, supplier payments, and equipment hire all fall due before invoices are settled.
Negative working capital risk: Outgoings outpace income, creating strain on the balance sheet.
Increased invoice volume: More customers and more invoices mean greater pressure on credit control.
If your business struggles to stay on top of sales ledger management during seasonal peaks, recourse factoring may be the better option. If you have the resource to handle debtor management internally, discounting could provide the flexibility you need.
Practical Considerations for SMEs
When comparing factoring and discounting, think about:
Your customer base: Do you have reliable payers, or is debtor chasing a challenge?
Your in-house expertise: Can your finance team handle the workload during seasonal peaks?
Your growth plans: Are you preparing for long-term expansion, or covering short bursts of activity?
Transparency of costs: Check for hidden fees. At Partnership Invoice Finance, we provide clear pricing with no surprises.
Experience-Led Insight
From working with companies across logistics, recruitment, and manufacturing, we see one trend consistently: those who plan ahead thrive. Applying for invoice finance before seasonal demand hits means you have funding ready when you need it. Waiting until payroll is due and invoices are already overdue creates unnecessary stress.
Conclusion
Choosing between recourse factoring and invoice discounting is not about finding the “best” product it is about finding the right fit for your business model. Recourse factoring provides support with credit control when your team is under pressure. Disclosed invoice discounting gives you more control if you have strong internal processes. Both release cash quickly, helping SMEs navigate seasonal growth without disruption.
With the right facility in place, you can cover payroll, pay suppliers, and focus on delivering for customers when it matters most.
Recourse Factoring and Disclosed Invoice Discounting FAQs
What is the main difference between recourse factoring and disclosed invoice discounting?
Recourse factoring includes outsourced credit control, while discounting allows you to manage collections directly.
Which is better for seasonal recruitment?
Factoring suits businesses needing extra support with debtor management, while discounting fits those with in-house credit teams.
How quickly can I access funds?
Typically, within 24 – 48 hours, with up to 80% of invoice value advanced.
Do I need fixed assets for security?
No. Invoice finance facilities are secured against unpaid invoices rather than physical assets.
Can small businesses use these services?
Yes. Invoice finance is designed as a small business financing tool as well as for larger firms.
Chris Falby
With over two decades dedicated to helping businesses in the South East thrive, Chris, Sales and Marketing Director, brings a wealth of knowledge in securing financial assistance for SMEs. His career began in mainstream banking, where he gained valuable experience managing advances. This foundation, coupled with his extensive network and expertise in independent funding, allows Chris to provide tailored invoice finance solutions that meet the unique needs of each client.