Debt factoring companies will always try to avoid this scenario by managing accounts, vetting customers, and chasing after payments in the most effective way possible.
Nevertheless, if a client doesn’t pay an invoice, either you or the factoring company takes responsibility for the outstanding payment.
More often than not, businesses will opt for recourse factoring, which means your company buys back the unpaid invoice and takes on the responsibility for the non-payment.
If you have agreed to non-recourse factoring, your factoring company is liable for the risk and you are typically absolved of having to reimburse the unpaid invoice.
Sonovate offers its clients bad debt protection on 90% of their net invoice value. This means your cash flow can remain unaffected and healthy even if a debtor fails to finance their invoice.
For example, if you issue an invoice for £10,000, you will be protected for £9,000 of the debt. Typically, this bad debt protection is only available when client payment terms are less than 60 days.