Reverse factoring vs dynamic discounting
Reverse factoring uses a funder’s money and keeps your payment date. Dynamic discounting uses your own cash, pays the supplier sooner and earns you a discount. Choose reverse factoring to protect cash, and dynamic discounting when you have cash to put to work.
How do they compare?
| Reverse factoring | Dynamic discounting | |
|---|---|---|
| Whose money | A funder’s | Yours |
| When you pay | On the original due date | Early, on the agreed date |
| Who pays the charge | Usually the supplier, through the amount the funder holds back | The supplier, through the discount |
| What you get | Stable supply and unchanged terms | A return on your cash |
| Funder involved | Yes | No |
| Main thing to check | How it is disclosed in your accounts | Whether the return beats your other uses of cash |
What does it look like with real numbers?
Take a 100,000.00 USD approved invoice due on day 60, paid 40 days early. The figures are an example, not a quote.
| Reverse factoring at 10% a year | Dynamic discounting at 1% | |
|---|---|---|
| Charge for 40 days | 1,111.11 (100,000 × 10% × 40 ÷ 360) | 1,000.00 (100,000 × 1%) |
| Supplier receives on day 20 | 98,888.89 | 99,000.00 |
| Buyer pays | 100,000.00 on day 60 | 99,000.00 on day 20 |
| Buyer’s result | No change | Saves 1,000.00, about 9.2% a year on the cash used |
The 9.2% comes from 1,000 ÷ 99,000 × 365 ÷ 40. Compare it with what that cash earns elsewhere, or what it costs you to borrow.
Which should you choose?
- Reverse factoring if cash is tight, or your terms matter more than a return.
- Dynamic discounting if you hold spare cash and want a return with no funder.
- Both if your cash position changes through the year. Use your own cash when you have it, and a funder when you do not.
What about invoice factoring and PO financing?
Those start with the seller rather than the buyer. Invoice factoring turns the seller’s invoices into cash once goods ship, and PO financing pays for production before an invoice exists. Our supply chain finance guide covers all four.
Can you run both on Strike SCF?
Yes. Reverse Factoring and Dynamic Discounting both run on the same record as the order, so the approved invoice is already there when you make or accept an offer.
Bring your next requisition.
We will run it through Strike with you, live, and reply within one business day.