Invoice discounting is a variation on factoring where the client company collects its own debts, but the lender still advances money against them.
You raise and pursue the invoice, and send a copy to the invoice discounter, which then pays you an advance of the total value. You then chase and collect the money yourself, before depositing it into a client account with the discounting company; finally, the discounter pays you the balance of the invoice, less a small fee.
One advantage of this is that the advance is higher (usually around 90%) and the fee charged is far smaller, though there is still a fixed percentage of turnover charged for processing. It is usually confidential, so that none of your customers need know that you are borrowing in this way, which appeals to some people. It does, however, mean that you have to pay a fee without handing over any of the responsibility for your debt collection.
Are all companies eligible for invoice discounting?
Factoring and discounting companies take the view that, because they aren't responsible for chasing money in, they have far less control and security with invoice discounting than with factoring, so they are much more stringent about the type of companies they deem eligible for it.
To qualify for invoice discounting, companies would normally need to be profitable, established for several years with audited accounts, and have an established and strong credit control function. It is not unreasonable for lenders to wish to be sure that the debts they lend against are real, and will be collected efficiently.