Factoring Price Guide
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Types of Commercial Factoring
Commercial loan and factoring services often provide recourse factoring as an option to companies whose customers are less reliable, or have a higher probability of defaulting on invoice payments. In recourse factoring, the business that sells the invoice to a commercial factor remains partially responsible for payment on the invoice if the factor is unable to collect payment from the customer. This works similarly to a traditional loan- the business may need to pledge collateral to secure the advance, and the factor can send the business to collections to collect on the unpaid customer account.
Non-recourse factoring is riskier for commercial factoring loan services, so it is often more expensive. In a non-recourse commercial finance factoring transaction, the business selling the invoice is not liable to the factor at all- the factor bears all of the risk. Advance amounts are usually lower and rates are higher for these types of transactions.
The type of commercial credit factoring you choose depends on your business. Make sure you know the ins and outs of the transaction before agreeing to terms or accepting an advance payment.