The main advantage of using a true non-recourse factor is that it can bring clarity and strength to your balance sheet. Beyond this advantage, there are not too many other advantages in using non-recourse factoring over regression factoring. As you can see, from an accounting point of view, a non-recourse factoring solution can be very attractive. They are completely far from any subsequent link with the application. You will receive cash for the debt and you will be able to continue your activity. For many non-recourse solutions as well, the factor requires the seller to have credit insurance for the debt. Credit insurance can often be expensive and difficult to obtain. In addition, the insurance company may not agree to cover the full amount on the invoice, making it difficult to sell your total revenue to the postman. This is often an area of tension between the seller and the postman. Factors are experts in credit risk analysis. They will not take unjustified risks or take high risks without incurring higher costs. Before entering into a non-recourse contract, think about the actual solvency of the debt and the customer.
Also look at the conditions to see when and how the debt could be returned to you. True non-recourse factoring involves a real sale of the claim. The factoring company, which assumes full responsibility for recovery and full liability, should not be paid by the debtor for any reason (without litigation). The debt is removed from your balance sheet and the cash is added as an asset. They are no longer responsible for monitoring or collecting the debt. Before taking some time for non-recourse factoring for a little time to determine the real usefulness of the agreement. In many cases, the non-recourse party only occurs if the debtor is actually insolvent, which often means that the debtor must be bankrupt just before or bankrupt. Finally, you may find that the cost of most non-recourse solutions is much higher for you than if you opted for a recourse option. This affects the cash flow generated by entering into the factoring agreement. If your customers are of quality and solvent, the use of non-recourse factoring may not have any tangible use. Consider non-recourse and recourse solutions if you are looking for financing.
For more information on how recourse factoring can benefit your business, contact us today. We look forward to discussing your goals and needs with you. Regression factoring is the most widely used form of factoring found today. As part of a factoring agreement, the seller must pay the factor in case the customer does not pay his debts. At first glance, this may seem negative to the seller of the debt. However, there are several reasons why regression factoring is often an effective solution for both the postman and the seller. If you`re considering factoring as a financing solution, it`s important that you understand the different options available. Factoring providers typically offer two different solutions: non-recourse factoring and recourse factoring. As a receivables seller, the type of factoring you choose can have a huge influence on your balance sheet and cash flow.