DSA Factors

What is Non-Recourse Factoring?

Non-Recourse Factoring is a form of factoring where you not only get an advance, but you also receive credit insurance on your receivables from your factoring company.

While one of the main benefits of factoring is receiving a cash advance on your invoices to improve your cash flow, with non-recourse factoring you receive the additional benefit of credit insurance. What that means is that your factoring company assumes the risk with the receivables you sell to them. It is important to work with a factoring company that offers non-recourse factoring. Factoring companies that only offer recourse factoring will require you to pay them back if one of your customers doesn't pay their bills.

There are a large number of reasons why a customer may not be able to pay their bills. The most obvious reasons are that they may go bankrupt or out-of-business. In these situations it can be very difficult or even impossible to get paid for your receivables, unless of course you have insurance on your receivables. With non-recourse factoring your factoring company assumes the risk for the receivables, so in these circumstances you are not out any money.

While there are credit insurance companies out there who provide credit insurance to cover you in these types of situations, typically they will only cover very large, extremely credit-worthy companies, plus they require that the invoice amount meets a minimum threshold before they will insure it. With non-recourse factoring things work quite differently, not only can you get insurance on large retailers, distributors, and Fortune 500 companies, but you can also get insurance on local mom and pop stores and any other small business who is requesting payment terms. With non-recourse factoring you also aren't limited to only large orders for tens of thousands or hundreds of thousands of dollars, but you get credit insurance on smaller orders as well, even if they are less than a hundred dollars.

Of course non-recourse factoring isn't just credit insurance with a cash advance, you also can outsource your entire accounts receivable department with non-recourse factoring. Your factoring company will handle all of the credit checking and collection work for you. Best of all, since your factoring company is handling all of your accounts receivable for you, there aren't any rules that you need to follow in order to make a claim, you don't even have to make a claim since you've already been funded by your factoring company.

How Do I Qualify for
Non-Recourse Factoring?

Available to All Wholesalers

Non-recourse factoring is available to all wholesale clients

At DSA Factors we offer non-recourse factoring to all of our wholesale clients. Non-recourse factoring is available to both established companies and new startup businesses, as well as to both domestic and foreign businesses. If you are a manufacturer, importer, or distributor and have receivables, then you qualify for non-recourse factoring.

Based on Your Customers Good Credit

Credit approval is based on your customers' good credit

At DSA Factors we are extending a line of credit to your customers, so all approval decisions are based on your customers' good credit. With our database of over 60,000 businesses across the US and Canada, along with access to several different credit agencies, we are proud to offer an approval rate of over 95% to our clients.

What is Covered Under Non-Recourse Factoring?

Non-recourse factoring covers customers with an inability to pay:

Customers who have declared bankruptcy

Customers who have gone out of business

Non-recourse factoring does not insure customer satisfaction:

Disputes due to damaged merchandise

Disputes due to late shipments

Any agreed upon deductions such as damage allowances

When a customer short pays an invoice

While you are still responsible for customer satisfaction, at DSA Factors we know the difference between a customer who is unable or unwilling to pay for financial reasons, and customers who have a legitimate dispute. With over 30 years experience offering non-recourse factoring, you can rest assured that your receivables will be covered when one of your customers is unable to pay due to financial hardship.

Non-Recourse vs Recourse Factoring

Both non-recourse and recourse factoring provide you with improved cash flow, continuing credit checks, and outsourcing your accounts receivable. The main difference is that non-recourse factoring also offers you credit insurance, where recourse factoring does not.

Below is a quick look at how non-recourse factoring compares to recourse factoring.

Non-Recouse Factoring

Non-recourse factoring

Recourse Factoring

Recourse factoring

With non-recourse factoring you get funded the same day that you invoice your customers, providing you with the improved cash flow that you need to grow your business.

With recourse factoring you also get funded the same day that you invoice your customer, so you still receive the improved cash flow needed to grow your business.

Since your factoring company is assuming the risk for your invoices, they will provide you with continuing credit checks on your customers to ensure that they are able to pay for your merchandise.

While your factoring company may not be assuming any risk, they will still provide you with ongoing credit checks on your customers as it is in everyone's best interest to get paid for an invoice.

With non-recourse factoring you are outsourcing your accounts receivable so your factoring company will handle all of the collection work. Because your factoring company assumes the risk associated with the invoice, they will do their best to collect while still treating your customers with the respect they deserve. Because a factoring company may have several vendors who sell to your customers, they also have better leverage in getting paid for your invoices.

Even though your factoring company isn't assuming the risk for your receivables, you are still outsourcing your accounts receivable to them and they will handle all of the collection work. Your factoring company will still work just as hard to collect as the last thing they want to do is charge back an invoice to you. You also still benefit from the extra leverage that a factoring company has in getting paid.

If one of your customers is unable to pay for financial reasons, whether bankrupt or out-of-business, you are covered by the credit insurance that non-recourse factoring provides you with. There is no need for you to reimburse your factoring company the advance they gave you in this situation.

With recourse factoring, if a customer is unable to pay for an invoice you are ultimately responsible for the invoice and may need to reimburse your factoring company the advance they gave you. However, you can rest assured that your factoring company has an extensive database of businesses and access to various credit reporting agencies, so companies that are not able to pay should not be receiving approvals.

If a credit is taken dues to a dispute, such as damaged merchandise or a late shipment, you are responsible for reimbursing your factoring company. The credit insurance provided with non-recourse factoring only insures your receivables against a financial inability to pay and not against customer satisfaction.

Just like non-recourse factoring, with recourse factoring you are responsible for any credits taken due to a dispute. Your factoring company can not assure customer satisfaction, so you will need to reimburse your factoring company in these situations.

Frequently Asked Questions about
Non-Recourse Factoring

What percent of my invoice is covered by non-recourse factoring?

Your invoices are covered 100% with non-recourse factoring from DSA Factors, all you pay is the factoring fee, there is no deductible.

Do all of my customers qualify for non-recourse factoring?

Each time you get an order you need to submit it to DSA Factors for approval before you ship and invoice your customer. As part of the approval process DSA Factors makes sure that your customers are current on any outstanding invoices and that they are credit worthy for the amount of the new order.

What happens if a customer isn't approved for non-recourse factoring?

Often times a customer isn't approved because they are past due. In this situation try submitting them for approval in another few days as we will be able to approve them once they pay any past due invoices. If an account isn't past due but has poor credit or a poor payment history, we prefer not to approve customers on recourse. If we are unwilling to extend credit to a customer, we feel it is in our client's best interest not to do so either. However, we are flexible and are willing to work with our clients in these situations. Our clients can always give us a call if one of their orders isn't approved.

I am a service company, can I qualify for non-recourse factoring?

Sorry, at DSA Factors we only offer non-recourse factoring to our wholesale clients. However, while we do not offer credit insurance to our clients who perform a service, we still credit check all of their accounts to make sure that they are credit worthy, as well as handle all of the collection work. We will always have your best interests in mind when making a credit decision about your customers.