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.
Most factors are flexible with good clients.
They're often willing to negotiate terms of an ongoing factoring commitment, such as reducing the discount fee or waiving additional charges. However, few will change the advance rate, because it's based on your customer's reputation and reliability, not yours. Realize you may or may not outgrow the need for factoring. Just as Pope continues to sell his receivables to American Receivable every week, many small-business owners work with factors long after their companies get a line of credit or other financing. Fast-growing companies often find their lines of credit too small for their needs.