You may not want your funds tied up in this type of account. Collection on these disputed invoices will remain your responsibility.Ĭhoosing to recourse or modified recourse factor, means it is likely that a portion of your advanced cash will be held in an escrow account to be used by your factor if payment is delinquent. Not all non-payment eventualities are covered however, and in instances like damage claims or disputes concerning service you will be required to buy back the invoices after a time period agreed upon by yourselves and the factor. Modified Recourse Factoring - In the case of modified recourse factoring, your factor will carry insurance against non-payment due to bankruptcy or serious financial issues with your customer. The risk to the factor is greater, and therefore, the factoring fees are considerably higher, and your factor will be much more selective. If your customer does not pay, whatever the reason, your factor cannot come back to you for payment. Non-recourse factoring - should you be concerned about the risk of non-payment with any of your customers, you may want to consider non-recourse factoring. This form of factoring offers the least amount of risk to the factor, and is the most popular choice for factoring your accounts receivables to increase your cash flow. You will have already received the cash advance from your factor, but you will become responsible for the unpaid invoice and will have to buy it back from your factor. If your customer does not pay the invoice after the agreed period, which could be up to 120 days, your factoring company will not be liable for the money. Recourse factoring - recourse factoring is generally the most cost-effective option. This relates to the contract you sign when you decide to sell your invoices to a factor for fast cash flow. One of the main decisions is to determine the best factoring service for your company. With these provisions in place, non-payment to your factor by your customer should be unlikely, but let’s still address the outcomes should your customer choose not to pay. Provide accounts receivable reporting and invoice management throughout the factoring process from invoice in to payment out.An invoice factoring company should always: Considering invoice factoring, but worried about the implications if a customer does not pay? Allow Bay View funding provide some clarification the process.įirstly, to put your mind at ease before we go into details, an efficient invoice factoring company will thoroughly vet your customers for reliability to reduce the risks associated with non-payment.

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