Factoring allows you to increase the security of your finances. Thanks to it, you receive payment for the carriage performed at your convenience, which allows you to maintain liquidity pay your obligations on time. Invoice financing, however, is not without risk, which is related to the attitude of your counterparty, specifically – to his reliability of payment.
Factoring makes it possible to get money from an invoice even on the same day, without having to wait a dozen or more days. The financier is the factor, which receives their reimbursement from the original payer of the invoice. The financing process goes smoothly, as long as the said counterparty proves to be reliable and does not withhold payment. If he is late, he must expect collection. If the receivables cannot be recovered, the factor can ask the client to return the funds paid to him.
Such a situation can occur if you choose factoring with recourse. Recourse means having to return the money paid to the factor if he does not receive it from your counterparty. This variant of factoring involves a lower fee, but also a higher risk. Factoring with recourse is best used with proven and reliable contractors whose solvency is not in doubt.
To avoid the risks associated with invoice financing, choose a service that includes protection against counterparty insolvency, such as insurance. Then there is non-recourse factoring, which means that the factor, i.e. the financing entity, will not ask you to return the funds paid if it does not receive payment from the original invoice payer.
The non-recourse factoring service includes accounts receivable insurance, offered for an additional fee. With it, in the event of a counterparty’s insolvency, the funds will be returned by the insurance company. The payment is made in accordance with the terms and conditions specified in the contract. It depends on them whether all or part of the amount will be returned, and what circumstances entitle the payout.
At Transcash , we offer full factoring in the non-recourse option. This service allows you to finance the entire relationship with a selected contractor or contractors, that is, all invoices issued to them within a predetermined limit. Thanks to this, you don’t have to worry about paying the money on time, because all the funds will hit your account right after the invoice is issued. At the same time, the service in this variant includes the possibility of insurance, which means that it is Transcash that assumes the risk of the counterparty’s insolvency. Thanks to this, the full factoring service with insurance is a product that guarantees the security of your finances and the preservation of liquidity regardless of the circumstances.
