Hi, I'm Paul DeLuca, founder of Meritus Capital. Today, we're discussing recourse factoring. What exactly is accounts receivable recourse factoring?
Recourse factoring is a program, in which a client wishes to sell its accounts receivable to a factoring company and generate immediate cash. However, recourse factoring is such that if the client does not pay the factor in 60 or 90 days, the factor will have recourse to the client that sold the initial invoice and ask for its money back. Well, that would seem pretty natural, wouldn't it? You would understand that to be that way.
Who would be qualified for a recourse factoring? Generally, companies need to have a little bit of profitability, history of it. Also, a company will generally need to have some kind of a balance sheet, a little bit of something that proves that they have had some stability in their company. In this way, companies can sometimes really lessen the overall cost structure of a factoring arrangement. So, this is a kind of recourse factoring that really people do look for many times.
Additionally, recourse factoring is also much more common, if you're going to have a non-notification factoring deal which is a subject of one of our other video series.
I hope this clarifies what recourse factoring is. We will also discuss in another video what non-recourse factoring is. Until then, we wish you the most success and we love to be here, an information source for you. If you have any questions or if you'd like to email any request for future video blogs, we would appreciate it very much. Make it a great day.