Recourse Factoring vs. Non-Recourse Factoring
How does freight bill factoring benefit truckers?
Successful truckers can’t wait 30, 60, or 90 days for accounts to pay freight bills. Phoenix Capital Group improves your cash flow by providing freight factoring, we pay truckers the same day you deliver the load then deal with the invoice process for you. PCG offers same day setup, quick approval, and fast cash in your hands!
Recourse factoring makes up most of the accounts receivable financing industry. When you make a recourse factoring agreement, you and your factor both acknowledge that you are responsible for buying back invoices that aren’t paid by your customers after a predetermined period of time, which could be 60, 90 or even 120 days.
Factors realize that this could be a risky move for a trucker in need of factoring. Many factors provide credit checks for all your accounts and prospective accounts. Since recourse factoring offers a factor the least amount of risk, it is the most affordable option for a business seeking to factor invoices in order to increase cash flow.
Non-recourse factoring means that the factor assumes the risk of non-payment by your accounts. With non-recourse factoring, your business is safe from the cost of bad debt, but the discount rate will be higher than it is for recourse factoring since it is a higher risk for the factor. Even with higher discount rates, many truckers see non-recourse as a promising agreement because the cost of an unpaid invoice is a much greater loss.
Which type of freight factoring should a trucker choose: recourse factoring or non-recourse factoring?
The most common choice for large businesses is recourse factoring but that does not mean this choice is the best for all businesses. The best thing to do is fill out a contact form to speak to a Phoenix Capital Group representative and discuss the terms of factoring agreements. After your discussion, it should become clear as to which choice should be selected.