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What is factoring?

A business using factoring simply gives its invoices to the factoring company who then pay up to 85% of the value of the invoices. The factoring company then collects the invoice from the customer. Once payment is collected the factoring company pays the balance of the invoiced amount less the agreed invoice factoring fees.

In the UK there are lots of factoring companies. Most factoring companies have different requirements and offers, and finding out whether financing is right for your growing or established business is only determined by understanding what factoring is all about.

What does recourse mean?

  • Access or resort to a person or thing for help or protection: to have recourse to the courts for justice.
  • A person or thing resorted to for help or protection.
  • The right to collect from a maker or endorser of a negotiable instrument. The endorser may add the words ‘without recourse’ on the instrument, thereby transferring the instrument without assuming any liability.

What is recourse factoring?

Recourse financing means the business is held liable for the future payment of the payable invoice in the event it is not collectable.

  • Under a recourse factoring facility, the factoring does not take on the risk of bad debts in the event of the customer not paying the invoices
  • Under a recourse factoring agreement, the factoring company will be able to reclaim their money back from the business if the customer does not pay the outstanding invoices.
  • If the factoring agreement is a recourse one then it will specify how many days after the due date for payment you must refund the advance.
  • Recourse factoring facilities are quick to set up as there is no risk for the factoring company.

The UK factoringhelpline.co.uk will be able to locate and recommend a good financing company for your business needs. Call 0800 597 4757 for more advice today or to get a factoring quote.