News release

COVID-19 Client update: Health and safety is top priority while Liquid Capital remains open for funding

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COVID-19 update: Liquid Capital will continue to provide businesses with access to much-needed working capital.

Amidst the global COVID-19 pandemic, we are first and foremost concerned about the health and safety of all our clients, colleagues, referral partners, lending partners, and loved ones — and hope that you are safe and well supported.

Your business health and the continued operation of your organization is also vital. Our team is working diligently to continue to provide ongoing funding. Small and medium-sized businesses are the foundation of the North American economy, and we will partner together to get through this. 

As new and unexpected business challenges arise, having reliable access to working capital will no doubt be a crucial part of your planning and strategies in the coming weeks and months. Liquid Capital and its affiliates are well-capitalized, and our goal is to maintain ongoing operations without disruption so that you can receive fundings as needed.

Our Liquid Capital group, including the back-office and underwriting teams, will be making use of remote tools and communication methods wherever possible. As new funding applications come in, the team will process these in the order they arrive and as quickly as possible.

If you need business cash flow support, please reach out by email or phone at your convenience. We can provide information and the available options for you to access alternative financing when you need it most.

Recourse invoice factoring

What is recourse invoice factoring?

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Learn about the benefits of recourse invoice factoring and how it can offer you even more immediate working capital.

Recourse invoice factoring

For small and medium-sized businesses, there are many benefits to factoring your invoices. Instantly increasing your cash flow is, of course, the number one reason. But you can also benefit from outsourcing your back office support, letting your factoring partner handle collections on your accounts receivable. Freeing up much of your time, you’ll be able to work on other parts of your business.

There are a couple of different types of invoice factoring, and “recourse factoring” is the most common. So what is recourse factoring, and why should a business understand how it works?

How recourse factoring works

In recourse factoring, a funding partner (aka your lender or the “factor”) buys invoices from you with the agreement that you will buy the invoice back if your customer is unwilling or unable to pay for the invoice when it becomes due. In this way, you share the risk of non-payment with the funding partner.

There is a major advantage for you in recourse factoring. This shared risk allows your lender to advance a larger upfront percentage of the invoice. Typically in a recourse factoring arrangement, you can receive between 80 and 90% of the invoice upfront, minus the initial fee. 

And once the factoring partner receives payment for the invoice from your end customer, you’ll also receive a reserve payment.

Conversely, in non-recourse factoring you won’t have to share the risk, but you’ll receive less working capital than with recourse factoring. In fact, you may receive less than 75% of the face value of the invoice —  plus, you will not receive any reserves or holdback once the invoice is paid to the factoring partner. To a business in need of more working capital, this can be a severe disadvantage.  

The benefits of recourse factoring

  • You want to access more cash asap
  • You’re okay sharing a little bit of risk
  • You want to collect more money when the invoice is paid (which are the “reserves”)

How to work with your funding partner

Find out what type of lending option your funding partner has available, and ask if they offer recourse factoring. It’s also important to discuss the lending terms and ensure their team has expertise and a proven track record. 

Factoring companies with excellent back office teams will also be able to help you improve your customer collections. Their experts are trained to spot businesses who are less likely to pay on time, and this can help you avoid non-payments and bad deals in the future. 

This is another big advantage of working with a high-quality funding partner, and should be an important consideration when deciding where to look for working capital.

 

Learn much more about factoring terminology in the Ultimate Factoring Encyclopedia. This free resource includes every definition you’ll need to know when applying for invoice factoring and securing working capital.

Factoring Encyclopedia eBook cover

 

Do you still have questions about recourse versus non-recourse factoring? Connect with us today!

Recent Fundings – March 2020

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