Advantages of Non-Recourse Factoring

Posted by Factor Funding Co. on February 12, 2013

When you take advantage of invoice factoring to handle your receivables, you eliminate a lot of the typical headaches that go along with servicing customers. Since the factor does the accounts receivable duties for you, you don't have to worry about sending out reminders for payment. But what happens if your customer never pays the invoice? The factor company is not going to take the loss without holding someone responsible. If you don't want to get stuck holding the bag, you may want to consider non-recourse factoring.

About Non-Recourse Factoring

Basically, non-recourse factoring offers the best of both worlds. You get the convenience of invoice factoring without the responsibility for the debt. With non-recourse factoring, you can enjoy the typical benefits of invoice factoring and get peace of mind knowing that you hold no responsibility in case the customer defaults on the invoice. Non-recourse factoring does tend to carry a higher transaction fee than the common factoring plan, but it may be worth it if you're concerned about possible non-payment.

Why You Might Need Non-Recourse Factoring

Do you need non-recourse factoring? Generally, this option is most advisable for businesses with customers who may not have good payment records. This way, the business owners can still factor those receivables, even if the clients don't have a good history of paying on time. But, even if your customers have excellent payment records, you can still benefit from non-recourse factoring. Sometimes companies, even those that have been profitable in the past, suddenly go out of business. In this case, you'd be stuck caring for those invoice payments. Non-recourse factoring serves as a kind of insurance against all of these scenarios.

How Non-Recourse Factoring Can Benefit Your Business

What are the benefits of non-recourse factoring? You can rest assured knowing that you won't ever have to undertake collection responsibilities for the invoice. For example, if your customer fails to pay the invoice in a timely manner, the factoring company will not pursue collection action against the customer. It will pursue action against you, which means that you'll have to go back to the usual routine of issuing collection notices and making collection calls to get the payment from the customer. If you use non-recourse factoring, you get peace of mind since you'll never have to deal with those kinds of problems again.

If you have a customer service business, non-recourse factoring may be just the solution to client payment issues you've been looking for.

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