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Pay attention to the advance rate, factoring fees, reserve requirements and note any additional charges including processing fees, ACH fees, application fees, etc. Compare your proposals what seems like the lowest fee can easily prove to be the most expensive thanks to additional costs.

There are two types of factoring recourse and non-recourse factoring. In recourse factoring the factor does not take on the risk of bad debts and non-payment by your customers. The factoring company will reclaim the money they advanced to you if the customer does not pay within a certain time period.

In advance factoring, the factor advances the full invoice value to the business at the time of the sale. In maturity factoring, the factor advances only a percentage of the invoice value to the business at the time of the sale, with the remaining balance paid when the invoice becomes due.

Two Ways to Factor Factoring can either be recourse or non-recourse. While both provide consistent cash flow, it is important to know the difference between the two before making a decision on how to fund your companys working capital needs.

Recourse factoring is the most common and means that your company must buy back any invoices that the factoring company is unable to collect payment on. You are ultimately responsible for any non-payment. Non-recourse factoring means the factoring company assumes most of the risk of non-payment by your customers.

Advantages of invoice factoring It makes business planning and forecasting more accurate and allows you to take advantage of opportunities that might otherwise be unaffordable. Better chance of your business surviving - Better cash flow gives your business a better chance of survival.

Invoice factoring eligibility depends on what type of business you have, where youre located, the type of industry you work in, and whether or not you have any outstanding liens or tax balance. Youll also need to work with creditworthy customers, who arent at risk of not paying their outstanding receivables.

There are two types of invoice factoring recourse and non-recourse factoring which differ in several ways, including typical fees, qualification requirements and which party is responsible for nonpayment. Heres what you need to know about recourse factoring and non-recourse factoring.