This is just a short post about using credit protection or credit insurance for a ‘non-recourse’ facility.

Some invoice factoring companies will offer their own policy that they underwrite themselves which will offer a true non recourse facility. One such lender is HSBC Invoice Finance and they offer a ‘Payment Under Guarantee’ where any covered debt is settled after 120 days. These policies can work very well but in terms of costs they are added to your service fee and as such are subject to VAT.

The alternative is to use a third party credit insurance company. Some argue it is better to let people do what they do best so in this instance they would use an invoice finance company for funding and an insurance company to provide cover against risk of non payment. In some instances better cover can be obtained against your debtors but it does mean managing two supplier relationships and it is important you comply with the requirements of the insurance.