Disclosed (also known as notified) invoice financing and undisclosed (non-notified) invoice financing refer to who your customer makes the payment to — either directly to the lender/factor, or to your company.
In disclosed invoice financing, your customer pays the lender directly, who then deducts what is owed and refunds the balance to you. This requires you to notify or disclose the arrangement to your customer, typically through a signed memo — hence the term “notified.”
In undisclosed invoice financing, your customer pays you directly, and you then repay the lender.
Disclosed financing often comes at a lower cost because it reduces the risk for the factoring house. However, if your invoices are small and spread across many customers, undisclosed financing may be preferred since it’s harder for the lender to assess those risks.
Some SME owners are initially uncomfortable with disclosed financing, fearing their customers may perceive them as being in financial trouble. In reality, large MNCs or government clients typically understand that long credit terms can strain vendors’ cash flow. Their finance and purchasing teams are usually separate, and knowing that your business is backed by a financier can build trust, not diminish it — it signals your ability to fund operations and deliver.
Still, some factoring houses understand the sensitivity and may offer a workaround: setting up a joint account in your company’s name for customer payments. This way, you can avoid the need for a signed memo, while still keeping the arrangement functional and discreet.
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Learn more about invoice financing and related terms in our glossary.
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