For many years, textile industry firms have turned to factors to help meet current working needs. Indeed, an early provider of factoring in the U.S. was Walter Heller, which offered this financial product, particularly to the textile industry.
With factoring, the financing firm purchases your invoices and advances you a high percentage of the invoice face value. For example, 75% to 92%. When the customer pays down the invoice, the factor remits the balance of the invoice, less a fee for the factoring service.
In traditional factoring, the factor simply provides the funding as well as some assistance in collections. If a customer does not eventually pay their invoice, the textile firm is on the hook for that amount.
Non-recourse factoring provides a type of credit insurance against non-collection from customers. In this type of factoring, the financing firm provides the funding and accounts receivable management. This is along with a credit insurance component. That is, the factor assumes the credit risk of a customer’s unwillingness or inability to pay their outstanding accounts receivable.
However, not all factoring firms can provide a credit insurance component. To be able to offer credit insurance, the factor must qualify with one of the large insurers that partner with the factor by having a strong balance sheet and a good credit culture in order to meet the insurer’s strict guidelines. For this reason, less than 20% of factoring firms offer non-recourse factoring with credit insurance.
BusinessCash meets tough insurer’s guidelines. With non-recourse factoring, in effect, we become your de facto credit department. Each of your customers will have a pre-determined credit limit, ranging from $20,000 to $2,000,000. The pre-determined credit limit will depend on their size and credit standing.