Before you finalise any contracts relating to these services, you should always disclose what happens if a debtor refuses to pay an invoice.
The most cost-effective solution would be for you to return the full amount of the cash advance, within an agreed period of time. This is known as recourse factoring and your business becomes liable for the unpaid invoice.
Another option is non-recourse factoring. In this instance, the factoring company takes responsibility for any non-paying customers and they cannot ask you for payment. However, as the lender takes on more risk, the deductible factoring fees can become much higher.
Nevertheless, factoring companies have a team of professionals who dedicate themselves to collecting outstanding payments from clients in the most efficient way possible. Not only this but invoice financing companies will vet your clients thoroughly before agreeing to advance their invoices.