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. Factoring companies offer credit protection as part of a non-recourse program.
What is Non-Recourse Factoring?
What are the Benefits of Non-Recourse Invoice Factoring?
- Credit protection against bankruptcy through the Factor’s Non Recourse Factoring
- Get cash advance in as little as 24 hours
- Up to 92% advanced rate
- We become your credit department
- Payroll funding
- IRS issues and liens can often be worked around
- Pre-approve your client’s credit
- Factoring company’s experience working with different services
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 company will sometimes factor its receivable assets to meet its present and immediate cash needs. It might also factor their invoices to mitigate credit risk. You may also refer to Factoring as accounts receivable factoring or invoice factoring. Sometimes, although erroneously, accounts receivable financing. The term you may use for accuracy to describe a form of asset-based lending (ABL) utilizing a company’s accounts receivable as collateral is Accounts receivable financing.
How Much Does Invoice Factoring Cost?
The cost 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. The Factoring Discount Fee or Factoring Rate is the cost to you for Invoice Factoring, AR Management, and Credit Protection.
How Does the Cost of Factoring compare to MCA Loans?
Many consider MCA loans to be bad credit business loans. Also that they 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 three months, and your net profits are less than $20k in those three months – DON’T DO IT!