Why Choose Non-Recourse Invoice Factoring?
Not all factoring services are the same. While factoring services will provide fast cash for invoices, the risks and processes involved vary. The main difference to consider when looking at factoring services is whether they offer recourse or non-recourse factoring. At JOBE Services Inc. (JSI), we provide non-recourse factoring for our small to mid-size business clients. Here’s why many smaller businesses prefer non-recourse for their factoring needs.
What Does Non-Recourse Mean?
First, it is important to understand the difference between recourse and non-recourse factoring. Recourse factoring, like recourse loans, allows the lender (factoring service) to hold the borrower liable for debts. This means if you sell an invoice using recourse factoring, you are still liable for the full amount of the invoice if your customer doesn’t pay for any reason. For example, if you factor an invoice for $1,000 and receive funds from a recourse factoring service, you could be required to pay that money back plus the factoring company’s fee if your customer goes bankrupt or does not pay the invoice for any reason. This can be a financial hardship for some smaller businesses because they are responsible for the guaranty of their customers credit worthiness – not a position you want to be in unless you have a qualified Credit Manager on staff.
With non-recourse factoring, businesses can receive fast cash for invoices without Credit Risk. Non-recourse factoring is where, JOBE Services Inc. acts as your Credit Manager accepting all the Credit Risk when buying accounts receivable from businesses. Once the invoices are Approved and Factored, business are not responsible for the guaranty of their customers credit worthiness – We Are. If a customer does not pay for any Credit Reason (such as bankruptcy or shuts down), the liability falls on JSI, not our client who sold the invoice. This is a wise choice for small to medium-sized businesses that do not have the cash reserves set aside to handle non-payment issues from their customers, especially with larger invoices.
Larger companies can absorb interruptions in their cash flow, from slow paying or even non-paying customers because they have cash reserves on hand as well as an established credit department. However, many businesses are more comfortable knowing they are protected from the Credit Risk with non-recourse factoring. Understanding liability is important when choosing your factoring company, as well as what is included with the service.
Texas Non-Recourse Factoring Company
JOBE Services Inc. offers no credit-risk, non-recourse factoring services for our small and medium size business clients in the Texas region. We offer complete transparency with our fees and services, including established credit limits and managed receivables for our clients. If you are considering invoice factoring for your business, contact any of our experienced staff, to discuss the options available. We offer same day funding with multiple payment options for quick, accessible cash for your business.