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Recourse vs Non-Recourse Factoring

There are two types of factoring agreements offered by companies. We laid out the key differences below so you can pick what’s right for you!

Which factoring is right for you?

Recourse Factoring

Low factoring fee: since there is a risk of you being responsible for your broker not paying, factoring companies charge a lower rate for recourse clients.

Low advance rates: you will receive a smaller amount in advances.

You’re responsible if the broker doesn’t pay the factor

No help with broker disputes: if a broker isn’t paying, the factring company won’t help you resolve any disputes

Non-Recourse Factoring

High factoring fee: since you won’t take responsibility for your broker not paying, factoring companies charge you a slightly higher rate to make up for the risk.

High advance rates: you’ll get a higher advance rate.

Factor absorbs loss if broker doesn’t pay - you are not responsible to pay that amount

Resolve disputes together: if a broker isn’t paying, you and the factoring company will work together to get payments from the broker.

Conclusion

At the end of the day, you get to decide what trade-offs are worth it for you. You also need to take into consideration that you may be paying lots of hidden fees on top of the factoring rate, whether you choose to do recourse or non-recourse.
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