||Types of Factoring
Which one is right for you?
Transwest Capital offers two different types of factoring:
- If a debtor does not pay an invoice for any reason (bankruptcy, insolvency, refusal, etc.) the seller must buy back the invoice from the factor or exchange it with another receivable of equal or greater value.
- This option means the lowest amount of risk for the factor, and that means lower fees for trucking companies.
Modified Recourse Factoring
- The factor carries receivables/credit insurance and offers protection to the seller if the customer is unable to pay the invoice due to insolvency or bankruptcy.
- If the customer refuses to pay the invoice based on reasons other than finances (quality, delivery, specifications, etc.) the factor then has recourse back to the seller’s other receivables.
Which one is best?
When choosing a factoring agreement, it’s important to carefully evaluate your clients’ financial solvency and credit history.
Recourse factoring is often the best choice for clients with which you have a solid business history. This choice means smaller factoring fees for you.
However, for newer clients or ones with spotty credit, modified recourse factoring will be the better choice.
Transwest Capital staff will be happy to provide consultation on factoring options for your business on a case-by-case basis.