When it comes to Factoring of Accounts Receivable, the two most important categories are recourse and non-recourse Factoring. Keep reading to learn more about non-recourse Factoring: its differences with recourse Factoring, and how it can help you maintain and grow your business.
How Factoring Works
Before we delve into specifics, let’s review how Factoring works. Factoring your outstanding invoices means selling them to a company (called Factor) that pays you upfront and takes care of the collection process in exchange for a small fee.
Factoring is a useful tool to free up cash locked in your unpaid invoices. It allows you to improve the cash flow of your business without incurring debt and without having to wait 30 to 60 days for your customers to pay you.
Now that we have laid out the basics of Factoring, we can take a look at recourse and non-recourse Factoring.
Think of the process we outlined earlier, but imagine that for some reason the Factor is unable to collect the invoices from your client. What to do in this case? Well, what happens next depends on the kind of Factoring you choose.
With recourse Factoring, you buy back any invoices that the Factor is unable to collect from your clients. By contrast, with non-recourse Factoring the Factor purchases your invoices “without recourse,” meaning that it absorbs the risk for any non-payment.
The Advantages of Non-Recourse Factoring
The advantages of non-recourse Factoring are quite obvious: to begin with, it protects your company from non-payments, which is a considerable benefit in itself.
Furthermore, non-recourse Factoring helps your company avoid bad debt, preserving your cash flow. The importance of this kind of protection cannot be overstated. In fact, research has shown that businesses with irregular cash flow are as twice as likely to fail as those with regular cash flow.
Interested in enjoying all these benefits? At ACS Factors we are a non-recourse Factoring company. We take the credit if your customer cannot pay—our loss not yours!
ACS Factors: Advancing the Capital You Need to Move Your Business Forward
At ACS Factors, we are here to help you turn your invoices into immediate cash. We are located in Upland, California, and have many clients in the distribution and logistics corridor which includes Ontario, Riverside, Fontana, Jurupa Valley, and Moreno Valley.