That offsets some of the cost of selling their invoices. Let the factor help you improve your business. A factor can become an advisor. That enables small-business owners to concentrate on growing the business. Recognize who is responsible for receivables collection.
Factors buy receivables either with or without recourse.
With recourse means that if a bill can't be collected, it will be returned to the seller. Without recourse means the bad debt is the responsibility of the factor. But invoices must be for top, creditworthy companies to be sold without recourse, Stieber says. Also be aware that if a receivable is sold without recourse, the factor may become quite aggressive in collecting its money, which might harm your relationship with a large customer. Once you have an ongoing relationship with a factor, negotiate for better terms.