There are two kinds of factoring for accounts receivable, and while both offer similar benefits in terms of access to cash flow and up-front financing, each works a bit differently on the backend.
Recourse factoring requires the business owner to pay the factoring company back if the customer does not pay the invoices on time. The trade-off is less risk for the factoring company, which usually translates to fewer fees and a higher likelihood of approval compared to non-recourse factoring.
Non-recourse factoring, on the other hand, means the business owner isn’t liable if the customer fails to pay the outstanding invoices. This means the factoring company accepts most of the risk and tends to charge higher fees or be more selective when offering non-recourse agreements.
At Porter Capital, we can help you determine which solution makes the most sense for your business based on a number of factors, including industry standards and trends, the size of your business, and expected returns on outstanding invoices. No matter what, we help you find the best solution for your specific business needs!