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USAfactoring
1439 W. Chapman Ave., Suite 31
Orange, California 92868

Non-Recourse-Factoring

Non Recourse Factoring

More important than all other reasons to go with non recourse factoring, if there is a shortfall that occurs on collection of a batch that is less than the amount advanced, you will not have to pay the difference. The last thing you want to do is write a personal check because one of your invoices that was factored came up short on the amount collected and you have to make up the difference.

A recourse factoring company will require a company to satisfy any shortfalls on a batch of receivables which would NOT be true if you had a non-recourse factoring. If you were to sign up for recourse be aware of the guarantees you give, especially personal ones. The last thing you want to do is write a personal check to make up the difference! The factoring company does take much more risk with non recourse finance factoring and is the reason the cost may run from 1 to 2 points higher but a great opportunity for start ups and small to medium size businesses. In the past, we have seen more trucking and freight companies using non-recourse factoring.


As the recourse vs non recourse table below demonstrates, non recourse has the effect of improving your working capital ratio.
A strong working capital ratio makes it easier to raise additional funds in the future.

Recourse Factoring Non-Recourse Factoring
Current Assets
Cash $90,000 $90,000
Accounts Receivable $20,000 $20,000
Inventory $25,000 $25,000
Total Current Assets
$135,000
$135,000
Current Liabilities
Accounts Payable $30,000 $30,000
Due to Factor $80,000 $0
Deferred Taxes $2,500 $2,500
Total Current Liabilities $112,500 $32,500

Working Capital Ratio

1.2

4.15


Use this Cash Flow Calculator to experiment with factors affecting your cash flow.

Amazing Fact: Many business failures are profitable when they go under. This cash flow calculator shows you how business-to-business sales, carrying inventory and rapid growth can absorb a business money. Change the variables on the calculator and watch their impact on real business cash flow.

After looking over all the numbers, you will have a much better idea how non recourse factoring will benefit you with no additional risk.