Factoring definition pdf

The two main types of factoring are recourse and non-recourse. Recourse factoring means the factoring customer will ultimately take responsibility for the payment of an invoice if the factoring company cannot collect payment from the debtor the customer's client. Non-recourse factoring means the factoring company assumes the majority of the credit risk for collecting on an invoice. Some factoring companies offer both recourse and non-recourse options. There are usually stipulations tied to non-recourse factoring, which typically has a highter factoring rate, so make sure you understand exactly what the non-recourse terms are before choosing this option.

For more information, see our article on the difference between recourse and non-recourse factoring. Skip to main content. We Look Forward to Hearing From You Complete this form and a representative will call you quickly with more information.

Fuel Card. Trucking Software. Did someone refer you to RTS? If so, who referred you? What Is Factoring? The factor pays the balance sum, i. On the other hand, in non-recourse factoring, the factor cannot recourse to the firm, in case the debt turn out to be irrecoverable. Conversely, the form of factoring in which the name of the factor is not mentioned in the invoice issued by the manufacturer.

In such a case, the factor maintains sales ledger of the client and the debt is realized in the name of the firm. Factoring may provide the cash you need to fund growth or to take advantage of early-payment discounts suppliers offer. Factoring is a short-term solution; most companies factor for two years or less. Plant says the factor's role is to help clients make the transition to traditional financing.

Factors are listed in the telephone directory and often advertise in industry trade publications. Your banker may be able to refer you to a factor. Shop around for someone who understands your industry, can customize a service package for you, and has the financial resources you need. To find out more about Trade Finance and what we can offer you, contact us at subscriptions tradefinanceanalytics. Free Trial. As the leading online publication serving the trade finance industry, Trade Finance is read daily by key decision-makers within global banks, export credit agencies, law firms and many more.

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