Key Differences Between Full Recourse vs Non-Recourse Invoice Factoring?
Bad Debt Protection from Bankers Factoring. Why Pick a Factoring Company without Recourse Back to You?
When it comes to credit risk, there are two types of invoice or A/R factoring: recourse factoring or without or non-recourse invoice factoring. What do we mean by “recourse”? Full recourse factoring means you are taking the non-payment risk plus the credit risk if your customer doesn’t pay the accounts receivable they owe you.
In addition, most recourse factors will charge you back these unpaid invoices at 60-90 days.
Without or non-recourse means that Bankers Factoring, as part of our factoring services, is taking the credit risk. This typically includes the risk of bankruptcy, insolvency, or protracted slow pay by your customer, the account debtor. B2B credit risk management is included in our pricing. In these volatile times, Bad Debt Protection makes sense and may save your business.
You could buy your own credit insurance policy, but the upfront premium for A/R insurance starts from $10,000-20,000. And Bankers Factoring probably buys accounts receivable insurance at a cheaper rate than you could.
As part of Bankers Factoring Without Recourse Funding, you get an easy-to-understand factor fee, no hidden fees, and unlimited working capital reflected in our non-recourse factoring agreement. You also get 24 hour online AR reporting, and our stellar customer service. When your customer pays the invoice, a color copy of their check and remittance advice loads into our cloud-based reporting system. Business Owners like how factoring works from Bankers Factoring.
If Bankers Factoring does take the credit risk (as defined above), it is important to understand that you are still responsible for the quality and performance of your product or service and meeting your contractual terms with your customer (the account debtor).
Terms required by your customer may include insurance requirements, return policies (both known and hidden), duration, shared costs, termination steps, warranty, training, security, business practices, intellectual property, vendor code of conduct, and treatment of confidential information under the account debtor’s vendor agreement and/or purchase order(s).
Sadly, we have noticed through the years, whenever we decline an account debtor (your customer) for credit reasons, and our client sells them without credit protection from us, inevitably, our client takes a hit. Sometimes those hits have been fatal to our client’s business.
Remember there is only one thing worse than no sales and that’s making the sale and NEVER getting paid.
As a small business owner, you worry about a big customer refusing to pay and 90-days credit terms. You know you need credit protection, but is the recourse vs non-recourse invoice factoring argument confusing?
The decision you make about recourse or non recourse factoring comes down to a few key questions. If you are selling to Walmart then credit is a non-issue, your fears are returns, dilution, and chargebacks. If a company with minimal credit information or a leveraged balance sheet is your biggest client, then to have Bankers Factoring take the credit risk might be your key to survival.
Factoring Receivables without Recourse
Let Bankers Factoring design you a factoring plan that puts the safest working capital in your pocket. We can provide you with the type of factoring you need, not the recourse factoring you are being sold.
Without Bankers credit approval and their non recourse factoring, I couldn’t have picked up my largest client and fixed my cash flow with their cash advances.Tom J, Oil Patch Contractor