Recourse Factoring vs. Non-Recourse Invoice Factoring?

What is the Difference between Recourse vs. Non-Recourse Factoring?

Non-Recourse Factoring gives you Bad Debt Protection from Bankers Factoring.

Why Pick a Factoring Company without Recourse Back to You?

Regarding 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 take the non-payment and credit risks if your customer doesn’t pay the accounts receivable or open invoices they owe you.

Recourse factors will charge you back unpaid invoices in 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. Bad Debt Protection makes sense in these volatile times and may save your business.

Should You Buy Credit Insurance versus using a Non-Recourse Invoice Factoring Company?

You could buy your own credit insurance policy, but the upfront premium for A/R insurance starts at $15,000. Bankers Factoring buying your 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 invoice factoring works from Bankers Factoring.

Bankers Factoring Takes the Credit Risk

Suppose Bankers Factoring does take the credit risk (as defined above). In that case, it is important to understand that you are still responsible for the quality and performance of your product or service and for meeting your contractual terms with your customer (the account debtor).

Client Responsibility in Non-Recourse Factoring

The 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).

Here is an example of Microsoft’s 16-page Vendor Agreement, and here are Walmarts Supplier Requirements.

Sadly, we have noticed over the years that our client inevitably takes a hit whenever we decline an account debtor (your customer) for credit reasons, and our client sells them without credit protection from us. Sometimes those hits have been fatal to our client’s business. 

What Happens if You Offer Terms Without Bad Debt Protection?

Remember, there is only one thing worse than no sales: making the sale and NEVER getting paid.

As a small business owner, you worry about a big customer refusing to pay and 90-day credit terms. You know you need credit protection, but is the recourse versus 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 sell to Walmart, 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 having Bankers Factoring take the credit risk might be your key to survival. That is why Bankers Factoring is the best non-recourse factoring company.

Factoring Receivables Without Recourse

Let Bankers Factoring design 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.

Read more about our Bad Debt Protection with Accounts Receivable Factoring.

Ready for the owner-employees of Bankers Factoring to fund your entrepreneurial dreams with non-recourse factoring? Call 866-598-4295 or go to Bankers-Factoring-Application.

Why Bankers Factoring | Trade Financing & Purchase Order Funding | Invoice Factoring vs AR Based Line of Credit