Understanding Invoice Factoring

Before diving into invoice factoring, it’s important to know about all the different things that go into the process. Different factoring companies offer different types of factoring as well as different terms. Knowing which types of factoring a company offers is crucial to making a decision to move forward. You can find more information on what services we offer here. In this post, I’m going to touch on a few differences that you may come across while searching for a factoring program.

Notification vs. Non-notification

Notification factoring means that the factor will notify your customers whose invoices you factor about your relationship with their company and request that your customers make future payments to them. By notifying your customers, there’s less risk on the factor’s end, since they’ll be more certain that the payments will be made to them and within the agreed terms.

Non-notification works just how it sounds: your clients aren’t notified. However, the factor might require that you change your remittance information to a lockbox and bank account in your business name, but they have control of it.

Contract vs. No Contract

Companies that require contracts will almost always advertise lower rates than those companies that don’t lock you into a contract. Remember that lower rates don’t necessarily equate to lower overall cost and be sure to read the factoring agreement closely. What you might gain in pricing, you end up losing in flexibility and control. If you only need to factor around half of your receivables, but are forced to factor all of them due to a long-term contract, you are essentially doubling what it should cost you. At CoreFund, we don’t have long-term contracts and don’t require a monthly minimum.

Recourse vs Non-recourse

Factors that work under a recourse contract are able to pursue their clients if the invoices are not paid by the debtors. On the other had, non-recourse factoring doesn’t affect the business factoring their invoices if they remain unpaid, only the debtors. We offer both types of factoring, depending on what you need for your business.

If you’re ready to start factoring your invoices, contact us today!

 

Post written by Senior Copywriter “Nikki Wakefield” of CoreFund Capital, LLC.
  • January 13, 2017
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