Non-recourse invoice factoring is a risk-free financial service. Most business owners do not fully understand what non-recourse invoice factoring is and how it can help their business. We’re here to help.
Frequently Asked Questions About Non-Recourse Invoice Factoring
Here are five of the most common frequently asked questions about non-recourse invoice factoring.
Question #1: What is Non-Recourse Invoice Factoring?
Non-recourse invoice factoring is a risk-free financial service that allows you to sell your invoices with a non-recourse agreement. An invoice factoring company will step in and purchase your invoices and advance you up to 96% of its total in just 24 hours or less. Because the invoice factoring company has purchased your invoices they now become responsible for collecting the payment. With a non-recourse agreement, this means that the invoice factoring company will take 100% liability for repayment on the amount advanced.
This allows you to keep money in your pocket longer and secure a strong source of working capital without the risk of having to lose it.
Question #2: How is Non-Recourse Invoice Factoring Different from Recourse Invoice Factoring?
With non-recourse factoring, the factoring company takes on the risk should the customer not pay its invoice, protecting the client from taking on the bad debt. The factoring company will take over the collections process and ultimately the bad debt should the debtor fail to pay. With recourse factoring, the factoring company splits the credit risk with the client. Should the debtor not pay its invoice, it is sent back to the client, who is then responsible for either collecting what is owed or assuming the bad debt.
Question #3: Can I Use Non-Recourse Invoice Factoring for My Startup?
Yes. Non-recourse invoice factoring is a financial service that can benefit businesses of all sizes. Most invoice factoring companies factor businesses ranging from startups to $2 million monthly sales or more.
Startups often utilize non-recourse invoice factoring as it is a great way to get financing without incurring debt to your business’s name. Your business will have access to its profits, rather than borrowing money from other sources, such as a bank. This allows your startup to build a strong source of working capital, which will set you up for years of financial success.
Question #4: Do I have to Use Non-Recourse Invoice Factoring to Factor all of my Invoices?
No. With non-recourse invoice factoring, you have the option to factor some or all of your invoices through spot factoring. With spot factoring, your business can pick one or some of the invoices they’d like to factor. This can help businesses recover their capital after a large order to ensure your business will run smoothly—without having to wait for the customer to pay.
Question #5: Do I Have to Have Good Credit to Use Non-Recourse Invoice Factoring
No. When you use non-recourse invoice factoring, the invoice factoring company will look into the financial standing of your clients—not your business. Because the invoice factoring company purchases your invoices, they look into your client’s financial history to ensure they will receive payment. Your business, no matter it’s credit, can get access to its profits, without incurring any additional debt. With this, your business can build up a strong source of working capital to increase capital and pay off debts faster.