Recourse vs. Non Recourse Factoring for Staffing and Temp Agencies
Non-recourse factoring companies give their clients additional financial protection. When a non-recourse factoring company factor an invoice, they assume the credit risk on that invoice. As the factoring client, if your customer is unable to remit payment on a factored invoice due to an insolvency event, the factoring company absorbs the loss, not your agency.
Most factoring companies offer accounts receivable financing to staffing and temp agencies with “full recourse;” however, full recourse factoring (or factoring with full recourse) leaves your company at a higher risk from bad debt. If your customer cannot pay a factored invoice due to a credit or solvency problem, your company will be required to buy back the factored invoice. You may even incur additional costs if the factoring company requires that you cover administrative or collection costs as well. Companies that factor with full recourse may also require clients to buy back invoices if they go unpaid for a specified period of time, regardless of the reason.
Non-recourse factoring companies will generally only require clients to buy back an invoice when it’s disputed by the customer, such as when a shipment was returned, refused or not received.
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