What is Recourse versus Non Recourse Factoring?
- What is Recourse versus Non Recourse Factoring?
- Is there a difference between non-recourse factoring companies?
- Submit your online funding application today to receive the following:
- What is non-recourse factoring?
- How much does non-recourse factoring cost?
- Are factoring fees tax deductible?
- What is the difference between recourse and non-recourse factoring?
- Do you need good credit for factoring?
- What are the risks of non-recourse factoring?
- How are you approved for factoring?
- Bankers Factoring is the best non-recourse factoring company.
- Ready for the owner-employees of Bankers Factoring to help you grow your company with our award-winning non-recourse invoice funding services, including bad debt protection? Use our fast online factoring application or call the toll-free number 866-598-4295
Is there a difference between non-recourse factoring companies?
Factoring is the best way to maintain business cash flow, especially if you have a business that has difficulty with bank loan approval. Factoring companies can give your business money upfront by buying your accounts receivable (A/R) at a discount. A/R factoring allows you to avoid late payments and get paid faster. It also gives you access to working capital immediately to take care of payroll or other expenses that require payment in advance.
Non-recourse factoring is the elite financing solution for businesses that need credit protection. Non-recourse agreements protect your business from unpaid receivables – we take on the credit risk. The only way to protect your cash flow is by Selling Your Invoices to The Best Factoring Company.
Whatever the reason, if your business cannot get enough money fast enough, then eventually, it will go under. We help companies keep their doors open, pay employees on time, and manage their accounts receivable (A/R) process.
With the help of a tremendous non-recourse factoring company like Bankers Factoring, keeping your company healthy and cash flow flowing will be as easy as pie!
Submit your online funding application today to receive the following:
- Up to 93% cash advances
- Same-day funding services
- Bad debt protection
- Access up to $4,000,000 in monthly funding
- 24/7 online reporting
- Outsourced support for A/R and credit departments
- More time and money to grow your business
What is non-recourse factoring?
Non-recourse factoring is a form of financing that allows you to receive payment immediately for your receivable invoices. Also called invoice factoring and accounts receivable financing. Non-recourse or without recourse factoring is when the factoring company takes on credit risk for uncollected A/R. Full recourse factoring is where the factoring client, not the factor, carries all the risk of non-payment.
Factoring companies purchase your invoices at a slight discount and advance 80 to 93% of your invoice value. Invoice funding can be highly beneficial if you wait for customers to pay their bills. Slow-paying customers can have extended credit terms causing additional delays. By selling these invoices at a slight discount, you receive cash immediately instead of waiting for payment from your customers or even having them default (bankruptcy).
Related article: Understanding Non-Recourse Invoice Factoring
How much does non-recourse factoring cost?
Now that you know what non-recourse factoring is and how it can help your business let us talk about the cost.
The amount you pay to factor depends on several factors, including:
- The size of your business
- The credit of your customers (account debtors)
- How quickly do your customers pay
- The amount of risk involved with your industry
- The amount of factoring you require each month
The fees can range anywhere from 1% – 3% per invoice processed, depending on the size of your business. Generally, the larger your monthly A/R, the lower your factoring rates. In addition, the factoring rate or costs, there may be additional fees or expenses incurred, including:
- Processing fees
- Wire transfer fees
- Administration fees
- Each factor includes their fee schedule in their agreement
Related article: Factoring Rates and Fees Explained
Are factoring fees tax deductible?
The answer is yes, but it depends on four primary considerations.
- Your business location
- The type of factoring agreement
- The business relationship with the factor
- Factoring expenses are deductible if you sell, not finance your receivables.
Factoring fees are deductible as a business expense when you sell invoices – you can take the tax deductions.
What is the difference between recourse and non-recourse factoring?
The difference is that recourse factoring is when a seller must pay back any debt the buyer does not pay for. On the other hand, with non-recourse factoring, once you sell your receivables, you are no longer responsible for collection.
Bad debt protection through non-recourse factoring at Bankers protects your business from customers.
- Bankruptcy: your customer has run out of funding and has filed with the courts to seek relief
- Insolvency: your customer does not have the financial means to fulfill their obligations or debts
- Protracted slow pay: even outside of the extended payment terms, some customers short-pay or pay slower than their terms because of financial difficulties.
Do you need good credit for factoring?
If you have bad credit, it is not the end of the world. No matter your financial situation, there are options to help you escape a bad situation and start fresh with a clean slate. Factoring companies do not require perfect credit scores to approve applications for factoring. Still, they do conduct thorough background checks that include an examination of your current credit profile. Qualifying for factoring is much easier than traditional lending through banks and lenders.
Because of repayment risk, lenders want to avoid doing business with individuals with less-than-stellar credit scores. Nevertheless, factoring companies do not operate under those same rules.
At Bankers Factoring, we know that many businesses need working capital right now – regardless of their prior financial situation. We work hard to ensure that commercial funding is accessible through non-recourse factoring programs.
Related article: The Due Diligence Process in Invoice Factoring
What are the risks of non-recourse factoring?
The main risk of non-recourse factoring is customer default for quality or performance issues, which the factoring company should provide bad debt protection. From a client finance perspective, they risk misappropriating or allocating factoring funds and not paying bills on time. Business owners need to use their funds strategically to succeed.
Make sure there is enough cash flow each month, and you will be able to pay bills in a timely manner.
Related article: The Pros and Cons of Invoice Factoring
How are you approved for factoring?
For factoring approval, you must have customers with a good credit rating and operational business. The approval process for factoring takes 3 to 5 days compared to traditional lending, which takes months. Aside from solid customer credit ratings, there are some main criteria:
- A/R aging summary and bank statements.
- Copy of the invoices to factor
- Personal and business identification
Related article: 8 Requirements to Qualify for Invoice Factoring Services
Bankers Factoring is the best non-recourse factoring company.
With the help of the best non-recourse factoring company, you can keep your business healthy and cash flow flowing. If you are struggling to stay afloat, factoring can help. There are many reasons why your business might be having trouble generating cash flow.
The economy may be down, and people are not spending as much on what you sell. Alternatively, perhaps the competition has gotten more robust, and your costs have gone up, making it harder for you to make enough profit to cover those extra expenses.
The decision to use Bankers Factoring non-recourse factoring can be life-changing for your business. With the right factoring company on your side, the funding process is easy and painless.