When choosing a Non-Recourse Accounts Receivable Factoring Company, what are the Key Factors to Consider?
As an entrepreneur, you always try to make the best decision on cash flow, credit, and AR management. It is very important to maintain a balance in order to make sure that your business will continue to sustain. Working Capital for one is very important because your day to day operations rely on it. Encountering problems with cash flow will definitely affect your working capital, potentially jeopardizing business opportunities. It is best to have back up plans with financing options, for working capital, cash flow solutions to make sure that you will always have funds for your business. Thus, to choose the best non-recourse accounts receivable factoring company, there are some key variables you should consider. When researching and selecting a Recourse vs Non-Recourse Accounts Receivable Factoring Company, here are some of the things you should take note of.
What is the Factoring Company’s definition of non-recourse?
Less than 20% of factors and alternative business finance companies utilize Credit Insurance. At AR Funding, we use credit insurance to protect both you and us against account debtor’s (your customers) filing bankruptcy or insolvency. When we are the buyer of your AR, you can enjoy credit protection because of our accounts receivable insurance policy.
What is covered?
Under AR Funding’s credit protection program, what we advance to you (80-92%) plus the factoring fee is covered. On approved account debtors, we take the credit risk! Many industries such as freight, trucking, and oil have a long history of bankruptcies and insolvencies. To have Non-recourse freight factoring is critical as a small trucker needing truck factoring.
What is not covered?
You are in charge of meeting your customer’s quality, quantity, and timeliness needs. When we verify your invoices under our accounts receivable management program, we will confirm that the product or service has been supplied to your customer’s satisfaction with the proof they need to pay (freight bill, bill of lading, Timesheets, etc.). However, quality issues can arise after the fact. Your company, of course, is responsible for any disputes with your clients.
Can they handle 100% Customer Concentration Factoring?
In this world of consolidation, it is the norm for smaller companies to have only 1 or 2 large customers. AR Funding understands that and one of the reasons we utilize credit insurance is to mitigate this single or concentrated customer risk. Our credit protection and AR management is typically included in your factoring fees.
What are your peak monthly or seasonal Working Capital Needs?
Our typical client uses us for $50,000-$5,000,000 per month. However, this amount can balloon because of their selling season. Make sure you pick a Non Recourse factor that is comfortable with the peaks and valleys of your business cycle. We have many customers whose seasonal swings became too large for their previous, smaller factoring company.
How strong is the Factoring Company’s balance sheet and what is their time in business?
With a 22 year history and billions funded for our client, AR Funding will be here long into the future for your working capital and credit protection needs.
How Fast can they Fund?
We will have you a proposal in 24 hours and can fund in 3-5 working days via wire transfer or ACH. When selling Invoices to us, AR Funding is built for speed!