No matter how well you manage your business, without effective protection, bad debts pose a constant threat.
Just one bad debt can be a serious drain on cash and profits. Increasing numbers of invoice financiers are integrating optional credit protection (bad debt protection) services to complement overall packages.
The Factoring or Invoice Discounting company simply identifies a protected trading limit for each of your customers, taking account of your needs and their individual creditworthiness.
So, if a customer does not pay, the insured amount is paid to you as soon as insolvency is confirmed. Some factors and discounters will also cover instances of failure of the debtor to pay within say six months of the due date irrespective of the debtors credit standing.