Non Recourse Factoring
What is Non Recourse Invoice Factoring?
Do different factoring companies have different definitions of the Invoice Factoring of Receivables Without Recourse? What is Recourse vs Non Recourse Factoring? And most importantly, how do I protect myself and my company from the “Nuclear Option”?
Statistics show that less than 20% of Accounts Receivable Financing Companies utilize credit insurance as part of their Non-Recourse Invoice Factoring product. Why is that number so low? First, you have to have a strong balance sheet and credit culture to qualify as the large insurers who offer credit insurance have very strict guidelines. Paragon passes both hurdles with flying colors. Secondly, it is not an inexpensive investment. However, Paragon being entrepreneurial just like our clients feels it is the right thing to do when offering receivable factoring.
Why do we feel strongly about utilizing credit insurance and passing on the benefit to our clients in the form of Credit Protection? In business there is only one thing worse than no sales and that’s selling it and not getting paid. Let’s answer the important questions about credit protection and non recourse factoring.
Key Factors to Consider about Credit Protection via Non Recourse Invoice Factoring:
- What is the Factoring Company’s definition of Non Recourse? At Paragon we become your defacto credit department (we like to brag you get a free Credit Manager with Paragon). Each one of your customer’s will have a pre-determined credit limit: $20,000-$1,000,000 for example. What we advance you plus the factoring fees will be covered for bankruptcy protection via our policy. We will always pre-approve your customers before we fund your invoices. Your salespeople will have a preapproved list on who to solicit for new sales. No wasting time on potential clients who don’t pay their bills. In addition, as your clients make payments on a regular basis with great credit history we can raise their credit protected limits. Your advance rate is also helped with nonrecourse factoring.
- What isn’t Covered under Non Recourse Factoring? At Paragon, our product gives you Working Capital, Credit Protection and AR management. You are in charge of keeping your customer happy. A big part of Accounts Receivable Management is confirming that your customer is satisfied with your service and product. Just like you, we want your customer’s quality, quantity and timeliness needs met. Of course that is your job. Hopefully our services will let you concentrate on meeting your customer’s needs since we have alleviated your credit and working capital issues.
- What if My Customer just doesn’t Pay Me? This is a question we hear from time to time and the million dollar answer is… Why? Creditworthy customers who have a history of paying their bills on time typically don’t turn bad overnight. Something is going on. Improper paperwork? High return rate? Staff turnover? Fortunately Days Sales Outstanding (DSO) typically goes down for our new clients as the AR Management and Invoice Verification process reduces errors and speeds up the Accounts Payable Department steps.
- What if My Customers just Pay Slow? That is a great question and the answer is… We are OK with Slow Paying Customers as long as they pay within 75 days (and we understand some industries like Oil & Gas can take longer) and we can get credit insurance on them. Again, it is all about protecting your business (and ours).
- What is the “Nuclear Option”? Your largest (or only) customer goes bankrupt… Paragon like you wants to live to fight another day. Sports Authority, A&P, Kodak, General Motors, Radio Shack, Linens n Things, Circuit City, Blockbuster, Adelphia; the list of huge, once healthy companies filing bankruptcy is endless. That is why we can credit protect you and the value we place upon it contributing to your company’s health and survival.
- Is this For All Industries? Yes. As long as your customers are creditworthy, one the many factoring benefit is is we cover all types of account debtors. This a very popular feature in freight factoring and bill factoring. With Invoice Financing from Paragon, turn your freight bill into immediate positive cash.