A factoring facility is a method of invoice finance where the management of the sales ledger is preliminary administrated by the funder. The funder runs the sales ledger and undertakes the credit control. This free up time within the business to allow them develop their business.
Factoring facilities can either by recourse or non-recourse. A recourse facility means that the debt is re-assigned back to the business often a set period of time. This is commonly 90 or 120 days from date of invoice. A non-recourse facility means that the debt is often protected by the funder via a credit insurance policy. Therefore, the risk of the debt remains with the debtor at all times.
Typically, factoring facilities are disclosed. Therefore, the debtors are aware of the funder’s position. However, the factoring facilities can be tailored to the business requirements.