Non-Recourse Factoring Keeps a Business Running With Sufficient working Capital Factoring is a financial service where business entities sell their invoice receivables to a financial company (Factor) at a discount to improve its cash flow. . Factoring can be recourse or non-recourse. Though both provide constant cash flow, there are differences between them. In recourse factoring, there is an agreement between the factor and client where the client needs to buyback unpaid bills which are receivable from the a factor. The credit risk remains with clients when debtors do not make payments. In non-recourse factoring, the factor and client agree wherein the factor bears the obligation to absorb the bills receivable that are remain unpaid. The business stays unaffected by unpaid invoices.
Non-recourse factoring explained In non-recourse factoring, a factoring company purchases all or some of the account receivables of the clients. Theoretically, a non-recourse factoring means when a debtor does not pay the invoices, the factoring company shall consider the loss on the invoice and not the client. It means the factoring company insures the receivables for the factoring client. The contracts of non-recourse factoring are little more expensive compared to a similar