There are quite a number of business owners who have simply chosen to shun completely the idea of invoice factoring. Most of these owners state that the invoice factoring costs are not worth incurring. It would interest you to know that a large number of these owners do not even mean the monetary costs that they will have to pay.
A good number of them are of the opinion that invoice factoring destroys the relationship between and business and its customers. Well, it is said that everyone is entitled to their own opinion thus they are allowed to have that onion. It is however important that one fully understands the invoice factoring process before coming to such a conclusion. As a matter of fact, choosing to factor your invoices can end up building an even stronger relationship between a business and its customers.
To start with, it would be good for us to understand the two types of invoice factoring. There are two types full recourse factoring and non-recourse factoring. With full recourse factoring, eth business will remain liable to the factoring institution for the invoice. The factoring institution will pay for the invoice as and when it will fall due but it will expect the business to pay it back; whether or not the customer actually pays the invoice. This means that as a business you will get your instant cash when the invoice becomes due but then you have to ensure that the customer pays for the invoice to ensure that you get money to pay the factoring institution.
With the non-recourse factoring, one can fail to pay back the factoring institution in the event that the customer was declared insolvent at any point during the factoring period. It has become known that a large number of the business owners that have a negative attitude towards invoice factoring costs are those that tried the non-recourse invoice factoring. The problems here are that people fail to understand how it truly works.
It does not completely absolve you as a business of all liability to the invoice. The only instance in which the business will not be held liable is if the customer was actually official declared insolvent. The customer could have closed down the business or be declared bankrupt; such issues are the only one that can absolve your business of any liability to the invoice. Otherwise you will still be liable for the invoice in the event that the customer fails to pay.