Invoice Factoring is only a form of invoice financing. Invoice financing refers to all processes involved in funding a business based on unpaid invoices. The process consists of a bank or company lending money to a business with unpaid invoices used as collateral.  There are two forms of invoice financing- invoice discounting and invoice factoring. These two practices make up the whole invoice financing system. The difference between the two methods is who collects money from customers and pays the other party.  In invoice factoring, the lender collects the balance from owing customers and pays the business owner after removing extra fees.  On the other hand, in invoice discounting, the business collects the customer’s balance and repays the loan and extra charges to the lender.