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Small Business Factoring

Factoring is the process of selling credit worthy accounts receivable for immediate cash. This cash flow tool has been around for over 100 years and has recently become a powerful way for small businesses to prosper and compete with big businesses. As a small business grows, it is often forced to offer flexible selling terms to its customers. This puts a strain on cash flow and creates the need for new financing options. By factoring invoices a business can offer flexible terms with the confidence they will have cash for the sale within one day.

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Could your business benefit from by having immediate cash for invoiced sales?

Recourse Factoring

Recourse factoring is now the most common of these financial transactions in the United States. This kind of transaction allows the factor to go back to the seller if payments are not received (normally after a 90 day period). The credit risk does not transfer to the factor during this process. Normally, in the event of non-payment by the customer, the seller must buy back the invoice with another invoice (credit worthy).

This particular option is typically the lowest cost for the seller because the risk for the factor on the funding transaction is lower.

Non Recourse Factoring

Non-recourse factoring puts the risk of non-payment fully on the factor.
If the customer does not pay the invoice, it’s the factors’ problem to deal with, and they cannot seek payment from the seller. This often seems like a great way to go, but the factor will only purchase solid, credit worthy invoices and will often turn away average credit quality customers. The cost is typically higher with this process as the factor assumes greater risk.

What’s the Best Factoring Solution?

This will depend on how you feel about your customers. If your customers are able to pay the invoices on a regular basis, then recourse factoring will provide a lower expense for your company. Non-recourse factoring may be better if the elimination of all risk is more important to you than the higher fee structure. Some business owners prefer the peace of mind this option brings and are willing to accept this higher expense.

Want a quick quote? Please click here to get a great rate.

Questions? Call us at 1 (877) 876 2803 now (toll free).

Learn about the cost of factoring.

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Speak with one of our representatives now about a new funding solution for your company by calling 1 (877) 876-2803.

Want a quick quote? Please click here to get a great rate.

Questions? Call us now at 1 (877) 876 2803 (toll free).

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