Non-Recourse vs Recourse
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Recourse and non-recourse factoring
When you make use of an invoice factoring company it is very important to be aware of who is responsible for debts which occur when customers fail to pay.
Recourse factoring explained:
This is a lower cost form of factoring because you continue to take the risk of bad debt rather than the factoring company. This type of factoring is also easier to attain, the invoice factor will tend to have less stringent rules about your business systems and the payment history of your customers. 90% of factor are recourse to avoid the high risk of unpaid accounts.
Once the invoice is returned to you, you are responsible for collection. If you are unable to do this then you can contact us and make use of our recourse collection service.
Non-recourse factoring explained:
With non-recourse factoring the factor assumes responsibility for all bad debts. This means that if a customer does not pay an invoice, either through insolvency or protracted default, you do not have to pay back the amount advanced to you by the factor. The factor legally takes ownership of the debt and as a result this type of facility attracts higher fees as the factor is increasing their level of risk.
Non-recourse factoring facilities are difficult to obtain if you have weak financial systems or numerous customers with bad payment histories as strict credit limits will be set for your customers.
Recourse factoring explained:
This is a lower cost form of factoring because you continue to take the risk of bad debt rather than the factoring company. This type of factoring is also easier to attain, the invoice factor will tend to have less stringent rules about your business systems and the payment history of your customers. 90% of factor are recourse to avoid the high risk of unpaid accounts.
Once the invoice is returned to you, you are responsible for collection. If you are unable to do this then you can contact us and make use of our recourse collection service.
Non-recourse factoring explained:
With non-recourse factoring the factor assumes responsibility for all bad debts. This means that if a customer does not pay an invoice, either through insolvency or protracted default, you do not have to pay back the amount advanced to you by the factor. The factor legally takes ownership of the debt and as a result this type of facility attracts higher fees as the factor is increasing their level of risk.
Non-recourse factoring facilities are difficult to obtain if you have weak financial systems or numerous customers with bad payment histories as strict credit limits will be set for your customers.