The Recourse / Non-Recourse Dilemma
There is plenty of confusion surrounding the issue of recourse vs non-recourse factoring. Most factoring facilities are provided on a recourse basis and the companies providing them usually downplay the merits of the non-recourse type, while on the other hand, companies offering non-recourse factoring will usually put an exaggerated emphasis on the benefits of this form of factoring. As with most things in life, reality usually lies somewhere in between.
At the extreme of the confusion is the idea, that on a non-recourse factoring facility, after you (the factoring client) have received payment for an invoice, there is absolutely no risk left related to that invoice, the fact is that this is very far from the truth. Most payment issues are not really credit-related (which is what non-recourse protects you against) but performance-related, which means they arise out of some sort of claim related to the performance of the services rendered, and there isn’t one factoring contract in this world that can free you of that risk.
Non-recourse factoring will typically and logically have a higher cost, will be more restrictive in terms of the account debtors allowed based on their credit rating, but will free you of the risk of non-payment related to credit issues. You should carefully consider if given your own situation this makes sense for you.
At Little Mountain Logistics we’ll tailor a factoring program specific to your needs, we can offer both recourse or non-recourse factoring and will work with you to help you make the best decision for your business. Feel free to reach out to us if you have any questions or if you are ready to get started.