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How Recourse Factoring Works
Recourse factoring enables a business to unlock the working capital tied up in receivable invoices. Businesses that factor with recourse sometimes enjoy lower rates than non-recourse factoring fees since the factoring company does not take on the additional risk from bad debt. Take a closer look at the process by comparing these two scenarios:
| Typical Receivables Timeline Day 1: Create a customer invoice for services rendered (or goods sold) in the amount of $7,500 Day 30, 45, or even 90+: Receive customer payment |
Recourse Factoring Receivables Timeline Day 1: Create a customer invoice for services rendered (or goods sold) in the amount of $7,500 Day 1: Factors the invoice through one of Corsa Finance’s specialty partners Day 2 or 3: Receive $7,125 ($7,500 less $214 factoring fee and $161 holdback) |
Organizations that factor with full recourse are generally required to buy back an invoice that goes unpaid for any reason or within a designated period of time (such as 90 days). Using recourse factoring to speed up cash flow could provide your company with many benefits; including freeing up working capital in order to:
- onboard new accounts or larger customers
- take advantage of early-pay vendor discounts
- avoid late-payment penalties (when slow-paying customers affect your ability to make payments on time)
- extend generous payment terms to your customers as a competitive client acquisition or retention advantage
Instead of spending time trying to collect customer invoices, recourse factoring generates cash flow from your receivables so you can stay focused on growing your business.
