Main Product Types - “Non-Recourse” Factoring
Non-recourse factoring operates in most senses like recourse factoring and offers the same services. In addition, the Factor accepts the financial credit risk of the Seller’s buyers failing and takes responsibility for any bad debts up to individually agreed limits. Funding is therefore not withdrawn after a specific period.
Each Buyer is carefully researched by the Factor and a specific ‘debtor limit’ applied. Subject to confirmation, the Factor will class invoices up to this limit as ‘approved’ and any trading in excess of the limit is usually at the Seller’s risk. All invoices within the agreed debtor limit are subject to bad debt protection, which means that any bad debt loss is absorbed by the Factor rather than the Seller.
The credit cover only relates to credit default non-payment and not to disputes or refusal to pay for other reasons. Just as with Recourse factoring, in the event of a non-credit default, the Seller is required to repurchase the invoice from the Factor.
For this reason, some people prefer to describe the product as factoring with credit protection.