For 50 years, Riviera Finance has offered non-recourse factoring services. Non-recourse factoring is the outright purchase of accounts receivable (invoices) for cash. This method of business financing provides a company with cash flow, protection from bad debt, and accounts receivable management services.
Riviera Finance pioneered the use of non-recourse factoring for small, growing companies. Without the cash flow to afford an accounts receivable staff, or the financial history to qualify for a business loan, many growing companies use non-recourse factoring in the early stages of their business.
The Riviera Finance Difference
One main feature of non-recourse factoring is that Riviera Finance will guarantee the credit of the factored invoice, even if your customer goes bankrupt. This guarantee is a powerful tool that can eliminate bad debt. Under recourse factoring, the borrower (you) must have the ability to “buy back” the invoice if the customer is unable to pay. In factoring jargon, this is recourse or a “chargeback” from the factor.
How Does Recourse Work?
Recourse creates a difficult issue for the business owner with cash flow needs. First, the business must hold some cash in reserve to allow for potential chargebacks. These charges can come anytime and will usually require immediate payment, either with cash or newly factored invoices.
The recourse factoring company typically holds a reserve as well to cover credit risk. This means the client (you) may receive only a limited advance (70 to 85%) when factoring your invoices – the factoring company holds back the rest until your invoices are paid or charged back.
Non-Recourse Factoring Benefits
Because non-recourse factoring companies assume the credit risk, they typically employ a team of experts to evaluate credit and manage the accounts receivable. Since the client isn’t on the hook for credit issues, neither the client nor the factor needs to hold a large cash reserve, if any. Reserves for the non-recourse factor are based on estimates of potential product returns or other “offsets.” In the case of service-based business (transportation, staffing, building maintenance, etc.), a good non-recourse factor can offer a “full advance” (no reserve), maximizing the cash flow to the client.
To deliver our non-recourse factoring services, Riviera Finance employs a team of accounts receivable management professionals in local offices across the United States and Canada. Riviera Finance non-recourse factoring clients depend on us every day to provide full credit, invoice processing, posting and collection services.
Make sure you come back for the next part of this series in a couple weeks – Part Two: How a Non-recourse Program Can Make Your Customers Happy.