Using trucking factoring companies speed up and simplify your process. Normally the factors buy invoices at discounted price and collect the invoice payment from your customer.
When planning export/import operations, you must know the trade rules and regulations of the particular country. You need to prepare various documents and titles which come under the foreign trade regulations. You can check the website https://www.census.gov/foreign-trade/regulations/regs/flipper/index.html to know in detail about Part 30 and Title 15 of US Foreign trade regulations.
Invoice factoring is the best option for firms that like to prop up their cash flow. Whether your customers pay right away after a purchase or slow in making payments. You don’t want to worry anymore when you chose a factoring company. Based on the reliability of your customer, you can either pick recourse factoring or non-recourse factoring.
The process of invoice factoring is as follows. First, you want to submit an unpaid invoice for the work completed. The factor checks the invoice and pays you a certain percentage of your invoice value. In the third step, the remaining money goes directly to the reserve account. At last, the factor receives money from your consumer and pays you the reserve money less their fees.
There are huge differences between recourse and non-recourse factoring. Recourse factoring has less transaction fee, and you have higher liability, whereas the transaction fee of Non-recourse factoring is high and the liability is very low.
The factoring firm leaves an invoice open for a certain period of time known as “Recourse” before the invoice needs to be paid. When any invoice goes beyond the recourse period, then the factoring firm charges back the invoice amount either by reducing the amount from your reserve account or withholding it from the consequent funding requests.
The transaction fees of recourse factoring type are lower and it increases when the invoices remain open outside the recourse time. It is a great option for the companies who have reliable and steady payments since it has the potential to reduce your lowering costs.
In Non-recourse factoring type, there is no fixed time frame for the closure of the invoice. It is a safe option than recourse factoring type in which the factoring firm has a greater risk for unpaid invoices. When your customers unable to pay the invoices, in recourse factor type your factor will not charge you anymore. But this type will not cover the invoices when there are customer disputes because of the problem in your services or products or accuracy. This factoring type cost you more so it is good to use this option when you are customers are not reliable and take a long time to pay the invoices.
For some industry types, non-recourse factoring is the ideal option than choosing recourse type. If you belong to any of the industry like construction, oil, and gas, freight brokers, manufacturing and transportation, then the non-recourse option is the right choice for you. Before selecting a factoring type, you must understand its pros and cons to your business so that you can enjoy its advantages completely.