As a business that is experiencing such major growth or some changes of some kind, you must have realized that there are some times when you have the need to access funds much faster than how your accounts receivables can manage. So as to avoid the cash crunch that may result and the subsequent business failures that may follow as a result, a number of businesses have to turn to alternative funding.
By far and large, bank loans have been such a common option for many to think of when faced with such needs in their operations and though they may be considered equally helpful, fact is that they are not the only option you may be left with. Think of invoice factoring as a solution that may serve your needs right at such times. Talking of invoice factoring, this is the practice of selling the unpaid invoices you have from your clients to a third party known as a factor who will then pay you an agreed percentage of the dues on the invoices. After they have bought these unpaid invoices from you, they will then go ahead and collect the amounts due from your clients directly.
Once you have so decided that you will be going for invoice discounting, then the next thing that you are to do is to choose an invoice factoring partner. Choosing one for your needs may be a challenge for a number of reasons and to help in this need, the following is a look at some of the most important things that you are to take into consideration when choosing an invoice financing partner for your needs.
Talking of some of the things that you are to be as particular with when choosing an invoice factoring partner for your business, one of the most important ones that you must look at is the type of factoring that they have on offer. Generally, when it comes to the types of factoring, it is to be noted that factoring can take these major two paths; recourse factoring and the non-recourse factoring. When it comes to the recourse factoring, this is generally where the customer whose invoices are being factored assumes the risk and guarantees the invoices and as such in the event that there is a default or failure to honor the invoices bought, then the customer will have to buy the defaulted invoices back. As for the non-recourse factoring deal this is where the factor is the one who takes the risk and guarantees the invoices and it is generally less common. Added to this, with the conditions as seen in it, non-recourse factoring happens to be rather costly.