Recourse vs. Non-Recourse Factoring
Many business owners may not understand what Non-Recourse Factoring vs. Recourse Factoring really is.
Non-Recourse Factoring applies to the inability of the client's customer to pay for credit reasons. For example, if a company does not pay for products or services due to financial problems, bankruptcy, out of business, these would be the factoring company's responsibility. If there are any disputes that the customer is claiming with regards to the quality of the merchandise, or shortages, etc., these issues would potentially have recourse. The factoring company at that point can ask to be reimbursed for that transaction or portion of the transaction that will not be paid. Some factoring companies have full recourse factoring all the time. DSA Factors has non-recourse factoring for companies that sell a product. When a service is involved, then recourse factoring is the norm.
Factoring is a cash flow tool, as well as "insurance" on accounts that get into financial trouble, but it is not really suppose to be a method of getting rid of bad debt. The customers still belong to the company looking to factor so you can't expect the factor to just buy a receivable and not have any recourse to the advanced funds over a disputed situation.
Non-Recourse Factoring is not simply a company selling an invoice to them and just walking away. The responsibilities of providing a good product or service still apply. Do not miss the opportunity of signing up with a better factoring company, like DSA Factors because you thought you were signing up with a factoring company that claims all invoices are bought without recourse. There are many factors out there that advertise only non-recourse factoring, but believe me, you will find many paragraphs in their very lengthy contract that gives the Factor the right to charge invoices back to the company. DSA Factors has a very simple two page factoring agreement with no hidden fees.
DSA Factors will fight very hard to get paid, even with companies that claim damages, before we give up trying to collect. The Factoring Industry continues to see growth because this tremendous cash flow tool is getting the recognition it deserves for the simplicity and solutions it provides.
