Factoring
is the process of selling credit worthy accounts
receivable for immediate cash. This cash flow
tool has been around for over 100 years and has
recently become a powerful way for small business
to prosper and compete with big business. As a
small business grows they are often forced to
offer flexible selling terms to their customers.
This puts a strain on cash flow and creates the
need for factoring. By factoring invoices a business
can offer flexible terms with
the confidence they will have cash for the sale
within one day.
Could
your business benefit from by having immediate
cash for invoiced sales?
RECOURSE
FACTORING
Recourse
factoring is now the most common type
of factoring transaction in the United States.
This factoring transaction allows the factor to
go back to the seller if payment is not received
(normally after a 90 day period). The credit risk
does not transfer to the Factor during the recourse
factoring process. Normally, in the event of non-payment
by the customer, the seller must buy back the
invoice with another invoice (credit worthy). Recourse
factoring is typically the lowest cost for the
seller because the risk for the factor on the
funding transaction is lower.
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NON
RECOURSE FACTORING
Non
recourse factoring puts the risk of non-payment
fully on the factor. If the customer does not
pay the invoice, it’s the factors problem
to deal with and they cannot seek payment from
the seller. This often seems like a great way
to go, but the factor will only purchase solid
credit worthy invoices and often turns away average
credit quality customers. The cost is typically
higher with this factoring process as the factor
assumes greater risk.
WHAT'S
THE BEST FACTORING SOLUTION?
This
will depend on how you feel about your customers.
If your customers are able to pay the invoices
on a regular basis then recourse factoring will
provide the lower factoring expense. Non recourse
factoring may be better if the elimination of
all risk is important to you then the higher factoring
fee structure. Some business owners prefer the
piece of mind it brings and are willing to accept
a higher factoring expense.
Learn
about the cost of factoring.
GET
A FACTORING QUOTE NOW
Email
questions by clicking here
Call
Us Toll Free at 1-877-876-2803
for a Free Factoring Quote
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