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Stories Tagged ‘non recourse factoring’

Non recourse factoring seems to cause some confusion and I must admit it has caused me to raise my eyebrow on occasion.

A true non recourse facility means that once a debt is notified and you are within the credit limit set by the lender you have nothing to worry about. If it goes past the agreed ‘recourse period’ the debt is settled by the lender.

However, some lenders offer credit protection/bad debt protection/ credit insurance alongside their finance products but this is not true non recourse. Any bad debts rely on you as the client making a claim. During the settlement period the debt in effect could be recoursed back to as far as funding is concerned. Alternatively the lender may continue to finance that particular debt at the clients expense.

If non recourse factoring is what you are looking for it is important to ensure you understand how any bad debt must be claimed for but also how it will effect your funding.

If you want to know more please contact Smart Factoring Quotes.

I have been approached by a client today who has a ‘non-recourse’ facility with an independent invoice factoring company. This is to say they have a credit insurance policy to cover their debtor book. As such the client should not incur any bad debts as long as they operate within the given credit limits.

However, it has transpired that a customer of our client has gone under owing them £150,000. There was a £150,000 credit limit in place so the client thought everything was covered.

The insurance company has now come back and queried certain procedures relating to timesheets and the dates of invoices and our client has provided everything that has been asked.

In short they insurance company has paid £60,000 and is disputing the balance on what appears to be minor technicalities.

It is not my place to say who is in the right or wrong here but the important facts are that the independent invoice finance company advised the client he was set up on their insurance. Now that insurance company has disputed the claim the client is now left owing the lender for the balance of £90,000.

Without access to the full facts it is hard, in fact impossible, to establish blame. The important thing is to highlight that you should request full terms and conditions for any credit insurance that your lender arranges for you. You should ensure this has been received and understood prior to signing any agreement. Importantly you should also ensure that they can provide the limits that you require.