Most often, two types of factoring are used: with regression and without recourse. The difference is who takes the risks in case the customer does not pay for the supply, a factor or you.

Factoring with recourse

Factoring with regression is usually cheaper than without it, and getting it for the first time is easier.When factoring with recourse, accounts receivable are retained on your balance sheet. The first payment factor does not transfer you all the money, but only a part.If the buyer does not pay on time, the factor makes a reverse assignment, that is, turns your factoring into a loan – requires that you return the first payment and pay a commission for using the money and working with the documents. The support from the factoring company is immense.

Factoring without recourse

This service is similar to the insurance policy, under which you already received a refund.

The factor buys your receivables on your balance sheet. The first payment factor can pay you the full amount.

If the supply is not paid, the factor remains one-on-one with your customer-buyer, you do not have to return the money to the factor.

What should you remember if you want to sign a factoring agreement?

Factoring is not the “financing of the last hope.” Factors do not work with those who need money yesterday. The best situation for a factor is when they are approached to him one or two months before the start of sales.

The factor takes care of communicating with your customers on a sensitive issue – timely payment. If your customers are strongly against such communication, most likely, the contract of factoring will not be concluded.

Carefully read the terms of the factoring agreement and all the annexes to it. If, in addition to money, the factor promises to provide you with services with complex names, ask what exactly and on what terms it offers you. Ask the factor to calculate the cost of factoring using an example from your practice. With these kinds of supports the development of the company happens to be easier than ever.

 

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