Explain about Non - recourse factoring in financial management.

Non – recourse factoring is an agreement made between factor and the client in which, there is no absorb for unpaid invoices.

• Higher fees.
• Lower liability.
• Unpaid invoices are not covered.
• Rate ranges from 3-5 %.

A non – recourse factoring does not offer you protection, if there exists any of the below mentioned conditions −

• Customer is not satisfied with your service/products.
• There is delay in payments.
• There are disputes between invoices and pay.
• If there are any credit issues or any insolvency, they will make payments.

Benefits of Non- recourse financing are as follows −

• Transfer of insolvency.
• Strong capital.
• Administrative costs decreases.
• Assessment of risk profile is done by factor.
• Client reliability is done by factor.

Some advantages of Non – recourse factoring are as follows −

• Improvement in cash flow.
• Easy to get.
• Protects from non-payments invoice.
• Cost of factoring.
• Short term funding.

Disadvantages of Non – recourse factoring are as follows −

• Level of protection.
• More factoring cost.
• More conservative.