Non-Recourse Invoice Factoring

Non-Recourse Invoice Factoring Information


 

Invoice factoring is a growing trend that helps various industries get on solid ground with their finances. Invoice factoring frees up funds and enables businesses to have sufficient cash flow for their day to day operations and pay the needed expenses.

Non-recourse factoring is a good option if you are uncertain about the repayment of accounts. In contrast to recourse factoring, where you must buy back non paid invoices within a specific timeframe, non-recourse invoice factoring does not come back to bite you, so to speak.

In non-invoice factoring, the risk of collections for the invoices. Therefore, you are paid a specific amount for the invoices and if the invoice is never collected, the loss falls back on the invoice factoring company instead of your business.


Once invoices are transferred to a factoring company, they take responsibility for the collections process and you don’t want to share in the risk of uncollected debt. There are some companies which work more with non-recourse factoring than with others. As an example, the transportation industry is more likely to work with non-recourse invoice factoring than with recourse factoring companies.

Non-Recourse Invoice Factoring Fees

Non-recourse invoice factoring does incur higher fees and expenses than recourse factoring simply because you are not taking the risks with unpaid debt.

Regardless of whether you choose recourse of non-recourse factoring services, you need to consider several things when reaching an agreement to with a factoring company. First of all, is the factoring company familiar with your industry? Some factoring companies work only with specific industries while others work with a variety of business and industries. You want a company that is knowledgeable about your services and products.

Since the factoring company will be dealing directly with your customers, you want to ensure they know how to respond to questions and how to address issues. How do they handle the collections process? How late does a bill have to be before an aggressive collections process is used?

Remember — customer retention is important and these folks will be working with you customers on the frontline. You want to work with a factoring company that also wants you to retain your customers.Non-Recourse Invoice Factoring

When you decide to use factoring, you have options. Do you want to periodically factor all of your invoices or just a specified amount? That is your decision to make. Consider how much money you need to keep operating and decide how much time and effort you want to put in collecting.

Remember, if you use an invoice factoring company they are responsible for handling the entire billing and accounts receivable process, you no longer have to put time and effort in it. Therefore, it is actually freeing up time and resources for you and your business.

How is my payment based? Your payment is based on the face value of the accounts receivable as well as the due date of the invoices. They charge a portion of the face value for their profit, which may be considered comparable to interest on a loan. Most companies pay from 75 to 85 percent of the face value of invoices, so yes, it could be considered an expensive form of credit, but it frees up cash and makes the funding process move quickly and makes the collections process the least of your worries.

Non-recourse invoice factoring may be the perfect solution to your company’s financial needs.