Non Recourse Factoring

As you can see this is a very narrow definition.

Non recourse factoring. It does not involve taking on debt or diluting equity. Non recourse factoring means the factoring company assumes most of the risk of non payment by your customers. Because of this non recourse factoring will be more expensive than recourse factoring. Factoring accounts receivable also called invoice factoring is the sale of pending invoices to a factoring company factor which is a type of financing company that specializes in these transactions.

There are usually stipulations associated with non recourse factoring and the situations in which you are not responsible for customer non payment are very specific. Recourse in factoring meaning. Thus the business remains unaffected by the unpaid invoices. Non recourse factoring is a type factoring facility in which the factoring company assumes the risk of non payment if the customer does not pay the invoice due to an insolvency during the factoring period.

What is non recourse factoring. It accepts specified risks around the debtor s failure to pay but it does not insure against debts that are unpaid because of genuine disputes. Non recourse factoring allows a company to sell its invoices to a factor without the obligation of absorbing any unpaid invoices. What is non recourse factoring.

Non recourse does not necessarily protect your company from all risk though. In theory a non recourse factoring contract means if an account debtor does not pay an invoice that the factoring company will take the loss on that invoice not the. Recourse is a type of factoring which happens when an entity has to sell the invoices to the client factor with a condition that the entity will purchase back any invoices that remains uncollected this means that in recourse the factor client is not taking any risk of the uncollected invoices. By using factoring which can monetize invoices in 24 to 48 hours companies can obtain funds to.

Non recourse financing entitles the lender to repayment only from the profits of the project which the loan is funding. Non recourse factoring is when a factoring company offers to purchase some or all of its clients accounts receivable without recourse. No other assets of the borrower can be seized to recoup the loan upon default. In non recourse factoring the factor takes on the bad debt risk.

Unlike recourse factoring a factoring client would not be required to exchange or repurchase invoices in the case of non payment by customer. Under non recourse factoring the client and the factor enter into an agreement where the factor shall bear the obligation of absorbing those bills receivable which remain unpaid.