In some situations, factoring can offer a simple solution to a pressing problem. For fast, flexible invoice financing – contact Merchant Factors today.Businesses facing a cash flow issue may be interested in finding out about accounts receivable funding, otherwise known as factoring. This means that you benefit from competitive factoring fees when you choose to partner with Merchant Factors.įrom application to pay-out, we offer the shortest turnaround time in the industry as the only independent debtor finance institution in South Africa. However, this factoring specialist does go to great lengths to collect on your invoices and avoid entering agreements when companies have customers with bad credit and poor payment histories.īeing a recourse factoring company, Merchant Factors does not have to charge a higher fee to make up for holding some of the risk. Like any factoring service provider in South Africa, Merchant Factors does not offer non-recourse factoring. If the debtor has a poor credit rating and payment history, it’s unlikely that the factoring company will agree to a non-recourse factoring model. This means that non-recourse factoring tends to be limited to invoices with creditworthy debtors. The few companies that do offer factoring without recourse tend to be very selective about the facilities they agree to.Non-recourse factoring is typically more expensive than recourse factoring, in terms of the fee charged on invoices funded.While this may sound attractive from a risk management point of view, it’s important to be aware of the costs: With a non-recourse factoring agreement, the factoring company accepts more of the risk of non-payment by your customers. Furthermore, Merchant Factors provides support and guidance to assist in the settling of disputed accounts. They are also scrupulous about sending reminder letters and final demands where necessary and as guided by you. Collecting credit risk related information.When you partner with Merchant Factors, their expert accounts and credit control team assesses the creditworthiness of your customers by: However, a highly experienced and well-established recourse factoring company like Merchant Factors has a lot of systems in place that aim to prevent this from happening – as well as support you should this type of event ever occur: In other words: if your customers can’t pay their invoices and your factoring company has gone to reasonable lengths to collect payment, your business will need to cover this cost.
With this agreement, your company is liable for buying back receivables that the factor cannot collect payment on.
Nonetheless, it’s good to know the difference. In fact, you’ll be hard-pressed to find factoring without recourse in South Africa. In South Africa, recourse factoring makes up most of the accounts receivable financing industry. In the unlikely event that your customers are unable to pay the invoices that you have sold to the factoring company, the “with recourse” or “without recourse” part of your agreement will kick in. What happens when your customers can’t pay the invoices? The result? You improve your cash flow and you spend fewer hours on back office tasks, giving you more money and time to grow your business.The factoring company deals directly with your customers on your behalf, managing your debtors’ book and credit control.Factoring is a working capital strategy, where a factoring company advances money on your accounts receivable.For simplicity’s sake, let’s refer to these models as recourse factoring and non-recourse factoring.īefore we draw a comparison, you may need a quick recap on how factoring works in general.
Did you know that there are two types of factoring? There’s factoring with recourse and then there’s factoring without recourse.
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