In the world of factoring, businesses often seek financial solutions that provide them with higher advances against their outstanding invoices. Recourse factoring is one such option that offers increased cash flow and flexibility to clients. In this blog, we will explore how recourse factoring can benefit our cannabis clients with higher advances against government issued invoices and why it may be a more suitable choice than non-recourse factoring.

Understanding Recourse Factoring:

Recourse factoring is a type of invoice financing where the factoring company advances funds to the client based on the value of their outstanding invoices. In this arrangement, the client retains responsibility for the credit risk associated with the invoices. If the debtor fails to pay, the client is required to buy back the invoice or replace it with a new one.

Benefits of Recourse Factoring:

1. Higher Advances: Recourse factoring provides clients with the opportunity to access higher advances compared to other financing options. Since the client retains the credit risk, the factoring company is more willing to offer increased funding, empowering the client to address immediate financial needs and fuel business growth.
2. Lower Fees: Recourse factoring typically involves lower fees and charges than non-recourse factoring. With the reduced risk exposure for the factoring company, clients can enjoy more competitive rates, resulting in cost-effective financing solutions.
3. Flexibility: Clients have the flexibility to choose which invoices to factor, allowing them to tailor the financing arrangement according to their specific cash flow requirements. This ability to select invoices strategically optimizes working capital management.
4. Improved Cash Flow: By unlocking higher advances against invoices, recourse factoring significantly improves a client’s cash flow. The accelerated access to funds empowers businesses to invest in expansion, cover operational expenses, and take advantage of growth opportunities.

Recourse Factoring vs. Non-Recourse Factoring:

While both recourse and non-recourse factoring offer benefits, recourse factoring may be more suitable for certain clients due to the following reasons:

1. Credit Control: Clients with robust credit management systems and confidence in their debtors’ payment capabilities may prefer recourse factoring. They retain control over collections and maintain strong customer relationships.
2. Cost-Effectiveness: Recourse factoring typically involves lower fees and discount rates compared to non-recourse factoring. For clients seeking cost-effective financing, recourse factoring provides an attractive solution.
3. Customizable Funding: Recourse factoring allows clients to pick and choose which invoices to factor, offering more flexibility in managing cash flow and focusing on critical financial needs.

Recourse factoring is an excellent financing option for businesses seeking higher advances against their invoices, coupled with cost-effective and flexible solutions. It empowers clients to maintain control over their credit management and enjoy improved cash flow, crucial for sustained growth and success.

Do not be fooled:

Some cannabis factoring companies employ deceptive tactics by disguising recourse factoring as non-recourse to attract clients without the above mentioned benefits. They may promote the arrangement as risk-free, assuring clients that they won’t be liable for debtor defaults. However, hidden in the fine print, clients might discover clauses that shift the risk back to them, making them ultimately responsible for unpaid invoices. It’s essential for businesses to thoroughly review the terms and conditions of any factoring agreement and choose a reputable company with transparent practices to avoid falling victim to such misleading tactics.

If you’re looking for a financing solution that maximizes your advances and provides tailored support for your Cannabis business’s unique needs, recourse factoring could be the ideal choice. Reach out to us today and explore how we can help your business thrive with our comprehensive recourse factoring services.