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Recourse and Non-Recourse Factoring

What is the difference between recourse and non-recourse factoring and how do both methods of factoring work?

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What is recourse factoring?

Resource factoring is a form of finance where a company sells its invoices to a factoring company. The factor pays the company a percentage of their cash value and then chases up payment of the invoices on behalf of the company.

Once full payment is received the factor reimburses the company with the remaining balance of the invoice and this is all done for a fee.

The agreement with recourse factoring finance is that if an invoice is unpaid or paid late then the Company will have to absorb the costs not the factor and buy back the invoice.

What is non-recourse factoring?

Non-Recourse factoring is a form of finance where a company sells its invoices to a factor and receives a percentage of the cash value from them. The factor will then chase up the invoices and once full payment is received will reimburse the company with the remaining balance of the invoice. The agreement with non-recourse factoring is that, within certain conditions, if the payments are late or unpaid then the Factor absorbs the costs, the company does not have to worry about debt created by unpaid invoices.


What are the key differences between recourse and non-recourse factoring?

The differences between recourse and non-recourse factoring are essentially who becomes liable for debt created by the non payment or late payment of invoices.

With recourse factoring finance if an invoice is unpaid or paid late to the factor then it is up to the company to buy back the invoices and either settle the debt or chase up payment with its customers.

With non-recourse factoring finance if an invoice is unpaid or paid late to the factor it is the factoring company who absorbs the debt.

Advantages and disadvantages of recourse and non-recourse factoring

Recourse factoring advantages
    • It's a cheaper form of finance than non-recourse factoring
    • Less stringent credit checks made on the invoice clients than with non-recourse factoring
    • The approval process is likely to be quick
    • Most of the invoices value is paid to the company
Recourse factoring disadvantages
    • The company, not the factor, is liable for any unpaid invoices.
    • If the company can’t afford the debt created by unpaid invoices then further action can be taken by the factoring company to retrieve it
Non-recourse factoring advantages
    • It can be a risk free form of finance
    • Beneficial for companies whose main business comes from a small number of customers
Non-recourse factoring disadvantages
    • The cost of this type of finance can be high
    • The terms by which unpaid invoices will be covered by the factoring company can be narrow so under certain circumstances the company may still be liable for unpaid debt
    • It can be difficult to secure non-recourse factoring finance as the factor takes on more risk so applications can be lengthy and thorough

  • Have you thought about recourse or non-recourse factoring as a cash flow solution for your business?

    Recourse and non-recourse factoring allows you to release cash quickly from your unpaid invoices.

    As your lender, we can release up to 90% of your invoices within 24 hours. On payment of the invoice from your customers, we will then release the final amount minus any fees and charges. There are different types of invoice financing options available to businesses depending on the situation and the level of control they require in collecting unpaid invoices.

    We are an invoice financing company who offer a solution whereby payments are collected on your behalf managed by our team of expert credit controllers so you can focus on running your business. Our Confidential Invoice Discounting solution is offered to businesses who want to maintain their own credit control processes, therefore this remains strictly confidential so your customers are unaware of our involvement.

    The benefits of invoice finance companies such as Hitachi Capital
      • Boost your cashflow without having to wait up to 120 days for your customers to pay you
      • An invoice finance company with a revolutionary digital onboarding process, giving you quicker access to funds and the ability to take on new business remotely during this lockdown period
      • Release up to 90% of the invoice straight away, and the final 10% when the invoice is settled
      • No need to chase your invoices, we can do it for you
      • 6 month trial period followed by a rolling contract

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Recourse and non-recourse factoring has been revolutionised with our digital onboarding process


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Please note that costs are an estimate only and are based on the entered values. Your final quote may change once a Business Development Manager has assessed your business in more detail.

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Why choose Hitachi Capital Invoice Finance as your factoring provider

      • A 6 month trial period so you can be sure the product is right for you
      • Followed by a 6 month rolling contract – we don’t tie our clients in for long periods
      • A one fee solution with no hidden fees
      • Award-winning client service by our team of expert Client Managers
      • Our Relationship Management team are in the field to visit you in person
      • We are part of Hitachi Capital (UK) PLC, a company that is going from strength to strength – we’re here for the long term.

Smarter, Faster and Simpler Cashflow Finance with Hitachi Capital

Smarter, Faster and Simpler Cashflow Finance with Hitachi Capital

Smarter, Faster and Simpler Cashflow Finance with Hitachi Capital

Find out how we are revolutionising the way UK SME's access cashflow finance.


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