Recourse / Non-Recourse Factoring

If you employ the services of an invoice factoring company it is important to be aware of who is responsible for debts which arise when customers miss payments. When you use a recourse factoring agreement the factor will not take on the risk of the debt, they will collect the sum from you if an invoice is not paid.

Recourse Factoring

This form of factoring is a lower cost option, your company will continue to take the risk of bad debt instead of passing the burden on to the factoring company. It is easier to arrange recourse factoring, the invoice discounting company will often have less stringent rules about your financial systems and the payment history of your customers. If your company has unreliable customers you could end up having to pay back the factor the money they advanced you on top of the standard fees and interest before you receive payment from your customer.

Non-Recourse Factoring

With non-recourse factoring the factor takes full responsibility for all bad debts. So if a customer does not pay an invoice you do not have to pay back the amount already advanced to you by the factor, they legally take ownership of the debt. Non-recourse factoring involves higher fees than recourse factoring as the factor is taking on a level of risk. Also it can be more difficult for your business to be approved for non-recourse factoring services if you have poor financial systems or a number of customers who have bad payment histories.

You should choose the right type of factoring for the current position of your business, but an equally important aspect is choosing the most suitable invoice factoring firm to deal with. You will find that some factors in the market offer poor service levels, even if they seem to be a cheaper option this lack of service could end up being expensive in the long term.

Our company has built up a strong network of invoice factoring companies in the UK which we trust, we can rely on them to keep their promises. Simply get in touch with us and let us put you together with the most suitable factor for your business requirements. The brokering service we offer is FREE so you have nothing to lose and you could make a real difference the profit levels of your firm.

IMPORTANT NOTE: We do not provide any financial advice of any nature and we only operate as introducers (not as brokers) to regulated companies and only for amounts in excess of £25,000.