There are very few things more important to a new, starting small or medium business than cash equity. There are many things that count as equity for example business equipment, cash on hand, line of credit, and even invoices. That's right! Invoices can be a means of equity for almost any business, but getting a working cash flow is usually only possible through recourse or non recourse factoring.

What exactly is non recourse factoring? How does non recourse financing differ from recourse financing? Is non recourse financing right for your blooming business? Let's take a few moments to explore the answers to these fascinating questions.

Factoring is a means of getting a cash advance on payable invoices. Factoring companies hold the payable invoices, and the business gets the much needed cash. When the debtor pays the invoice directly through the financing company, and monies remaining are then given to the business. There is a fee, of course, for this service, and the service has two types of factoring coverage: recourse and non recourse.

Recourse financing translates to what the meaning of recourse actually is in and of itself. When recourse financing is the term of the cash advance on payable invoices, should the debtor of that invoice not pay his or her invoice, the factoring company has "recourse", or the option, to get the monies owed directly from the business receiving the cash advance. Recourse financing means the business is held liable for the future payment of the payable invoice.

On the other hand, non recourse financing is similar but different. With non recourse factoring, should the debtor of the payable invoice not come through on the payment(s), the business is not responsible for the cash advance amount or fee. Instead, in non recourse financing, the financing company is held liable for receiving payment from the payable invoice.

Both types of factoring are popular, and usually, a financing company only does one. However, more and more financing companies are choosing to offer both services to their customers. Since recourse financing is less dangerous for the factoring company than the alternative, factoring companies are choosing both as a viable option for your cash advance needs.

As may be obvious, non recourse financing has a higher liability than the recourse financing to the factoring company. This means it is easier to get a recourse financing cash. Nonetheless, getting a factoring loan will have a lot of different factors taken into consideration such as credit rating, cash amount of the invoices available, and/or time business has been in business.

Finding a good financing company will be the best way to decide this answer. Factoring companies have different requirements and offers, and finding out whether financing is right for your growing or established business is only determined by speaking directly with a reputable factoring company.

There are few things more exciting, compelling, or time consuming as having a new business trying to get past its first year successfully. Established businesses and new businesses share many things in common, but an established business is less likely to have issues with immediate cash flow. Either way you look at it, asset based factoring is a great way to get working cash flow out of assets immediately instead of tomorrow.

What exactly is asset based factoring? Asset based factoring is a method of selling payable invoices to a factoring company at a loss of the total due on the invoices. Selling those invoices is a great way to get working capital out of payable invoices due in the future.

There are many reasons invoices may be due in the future - accounts to be paid on a regular basis such as weekly or monthly, lines of credit offered, or invoices yet to be sent. All of these reason are just the beginning as to why people have invoices due. If you do a lot of business with debtors paying in the future instead of today, asset based factoring may be for you.

If you find you may benefit from asset based factoring, there are some basic consideration to keep in mind.

Understand The Lingo
Understanding the lingo of the factoring industry will insure you get the most out of the experience. Knowledge is power. Without knowing what is being said, you and your business are at the mercy of the factoring company.

Rates And Fees
The obvious profit for the factoring company comes in the terms you receive. There are rates and fees usually associated with the amount of the invoices. Nevertheless, many factoring companies are starting to offer a set rate no matter how much you receive for the invoices. Of course, this is good because it offers those with a high value of invoices a lower fee; and this is bad because those with a lower value of invoices pay a larger fee. Make sure you know which one you are dealing with.

Read The Fine Print
As is a necessity for anyone, reading the fine print is extremely important. Just because the person helping you fill out the paperwork is friendly and sociable does not mean they may either forget or neglect to mention important aspects of the transaction. Ask questions if you are unsure of what is meant; if your questions are not answered to your satisfaction, do not do business with that factoring company.

Time Limits
Many factoring companies only allow for invoices payable with 2 weeks; some factoring companies allow for invoices payable within 90 days. Make sure to ask.

Liability
Ask the factoring company who is liable for invoices not paid by the debtor. There are some factoring companies offering asset based factoring who do not require the business to pay the invoices. Instead, these non recourse factoring terms mean the factoring company will hold the liability of collecting the debt directly from the debtor not your business.