As we had briefly talked about in a previous blog, there are any differences between recourse factoring and non-recourse factoring. Because the advantages of this factoring service are so great, we want to ensure that you fully understand what non-recourse factoring can do for your business.
What is Non-Recourse Factoring?
Let’s get more in depth about what exactly non-recourse is. Non-recourse is a form of credit insurance factoring. What this means is that when we, the factoring company, purchase your outstanding invoices, we take on 100% of the risk if your client fails to pay the balance of their invoice.
What are the Benefits of Using Non-Recourse Factoring?
Non-recourse factoring provides nearly endless benefits to businesses in all industries and of all sizes. By using non-recourse factoring, your business will be able to get up to 96% of its outstanding invoices in just 24 hours or less with no risk to your business’s name.
Let’s put this into perspective.
Let’s say you are running a small apparel business. You land one of your biggest orders in your career. A major department store purchases a bulk order of your clothing line for $50,000. Your small business now has to rush to fulfill this massive order without sufficient funds. You look to a factoring company, but they only offer recourse factoring. They grant you 96% of this invoice and you start fulfilling the order. Suddenly, your buyer backs out and will not pay off his invoice. You are now left with bulk amounts of clothing and a repayment fee of close to $50,000. This can put you out of business for good.
If you were to have chosen a factoring company that provides non-recourse factoring, they would have been responsible for that $50,000, keeping your finances and your business intact.
Who Can Benefit From Non-Recourse Factoring?
In the example, we explained how non-recourse factoring can benefit small business, but this service goes further than that.
Non-recourse factoring is great for larger, more established businesses, with a vast customer base. Near the end of the year, many large businesses look to clean up their finances. A large business would look to a non-recourse factoring company to take on their outstanding receivables with the benefit of being free of any obligations if customers fail to complete payment. This will result in your business being able to end the year with balanced finances, happy employees, and satisfied customers, without taking on any additional debt or any credit risk.
Over 90% of the clients that use our factoring services use non-recourse factoring. These clients are from businesses of all sizes and in industries, such as:
- Oil and Gas
- Transportation, and more.
The Bottom Line
Non-recourse factoring gives you the ability to get cash for your business quickly with no strings attached. It eliminates the liability of credit risk from your business if you invoices are not paid by your customers.
Non-recourse factoring eliminates time consuming and costly collection efforts so that you can get back to doing what you love the most. We take on the collection process and ensure that your clients are treated with complete professionalism.
We hope that this guide has helped you fully understand what non-recourse factoring is and how it can benefit your business.
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