Disclosed (also known as notified) invoice financing and Undisclosed (non-notified) invoice financing refers to who your customer makes the payment to – the lender/factor, who will then deduct whichever is owed to them and refund you the balance if any - or you and which you will then pay the lender. As you need to notify or disclose to your customer to do so typically via a signed memo by them, thus the name notified invoice financing.
Disclosed invoice financing may cost lower than undisclosed financing as receiving the monies directly lower the risk to the factoring house. The reverse is true if your invoices are small amounts from multiple customers as it makes it harder for lenders to assess the risks.
SME owners might at times feel uncomfortable with disclosed financing, as they fear that their customers will think that they are in financial difficulty. If your business is with large MNCs or government projects, they usually understand their long credit terms will affect their vendors’ cash flow. Furthermore, their finance and purchaser are often not the same people anyway. Knowing that you have a financier supporting your business, may actually give them the confidence that you have the funds to get the necessary equipment or to fund your payroll and deliver on the project.
Some factor houses understand for some borrowers, the concern remains. So, they may instead set up a joint account that reflects your company name instead, which you will just have to inform your customer to pay into later without a signed memo.
With FindTheLoan.com you do not have to worry if the various terms used by different lenders’ websites refer to the same thing. Simply reach all our Financing Partners with just one submission to compare and Find The Loan you need.