How Non-recourse Factoring benefit your small business
What is the difference between Recourse & Non-Recourse Invoice factoring?
Is Non-Recourse Factoring more expensive than A/R Factoring with recourse? Here are answers to both your Recourse and Non-Recourse A/R Financing questions.
Non-Recourse Factoring or Factoring Without Recourse is an agreement within a factoring contract where the factor’s client does not have to pay back the factoring company if an invoice is not specifically paid due to the bankruptcy of the client’s customer (the Account Debtor) under an invoice with credit protection in place. BusinessCash offers credit protection as part of our non-recourse program.
What Are the Benefits of Non-Recourse Invoice Factoring?
- Credit protection against bankruptcy through Paragon’s Non Recourse Factoring
- Cash is advanced in as little as 24 hours
- Up to 90% advanced rate
- We become your credit department
- Payroll funding
- IRS issues and liens can often be worked around
- Pre-approve your client’s credit
- 19 years servicing industries of all kinds
What is Invoice Factoring?
Invoice Factoring is a financial transaction and a type of debtor finance in which a business sells its accounts receivable (invoices) to a third party (called a factor) at a discount. A business will sometimes factor its receivable assets to meet its present and immediate cash needs. It might also factor their invoices to mitigate credit risk. Factoring is commonly referred to as accounts receivable factoring, invoice factoring and sometimes erroneously accounts receivable financing. Accounts receivable financing is a term more accurately used to describe a form of asset-based lending (ABL) using a company’s accounts receivable as collateral.
How Much Does Invoice Factoring Cost?
The Factoring Discount Fee or Factoring Rate is the cost to you for Invoice Factoring, AR Management, and Credit Protection from Paragon. It is typically based on your monthly volume and creditworthiness of your Customers (the Account Debtors) and can range from .9-2.5% per thirty days.
How Does the Cost of Factoring compare to MCA Loans?
MCA loans are seen as bad credit business loans and are typically 4 to 10 times more expensive than Invoice Factoring with none of the protection. The MCA ACH Loan Rule of Thumb says, whatever the MCA Rate Factor dollar amount is over the payback period, your net profit should be more. If not, at the end of that period you will be that much closer to bankruptcy. For example, if the ACH loan cost is $20k and you are paying it back over 3 months and your net profits are less than $20k in those 3 months – DON’T DO IT!