Bad debt protection is increasingly being sought by companies factoring their invoices and this can be achieved in one of two ways. Some factoring companies offer a non recourse factoring facility, which as the name suggests is without recourse to the client in the event of the failure of the customer.In this case the factoring company will underwrite individual credit limits on each customer and will accept the bad debt loss in the event of the insolvency of that customer up to the agreed limit.
Factoring Companies and Bad Debt Protection
The advantage of this facility is that the client only has to deal with one company but the disadvantage is that the credit limits on offer can sometimes be restrictive as the factoring company will look at it’s own overall indebtedness to a company and when it feels that the overall exposure is high enough will probably cease to underwrite new limits.
This means that a company wishing to sell on an insured basis to a well known name may find that he can only obtain a derisory limit as the factoring company has reached it’s own limit.
Factoring with recourse and separate credit insurance
An alternative is recourse factoring with a separate credit insurance policy as this has the advantage of greater flexibility.
There are a number of credit insurance companies in the market place all having different strengths and weaknesses.
Whilst Factoring Solutions deal with many of the non recourse factoring companies we also have a relationship with a credit insurance broker who knows the insurance market as intimately as we know the factoring market and they can place the credit insurance with the most appropriate underwriter for the type and size of company which can result in higher credit limits at lower cost.
Packaging the factoring and credit insurance elements separately allows for maximum flexibility in choice, coverage and cost and as there are no charges for our services why not contact Factoring Solutions for an informal chat without any obligation whatsoever.