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Several Types of Factoring Arrangements: Determine What’s Right for your Company

There are several types of factoring arrangements in finance, each with its own unique features and benefits. The most common types of factoring arrangements include:


Recourse factoring

This is the most common type of factoring arrangement, where the company retains the risk of non-payment by its customers. If the customer does not pay the invoice, the company is responsible for repaying the factor for the amount advanced.


Non-recourse factoring

In this type of factoring arrangement, the factor assumes the risk of non-payment by the company's customers. If the customer does not pay the invoice, the factor absorbs the loss, and the company is not responsible for repaying the factor.


Full factoring

This type of factoring arrangement involves the factor taking over the entire sales ledger of the company. The factor is responsible for managing the sales ledger, collecting payments from customers, and providing financing to the company.


Spot factoring:

This is a one-off factoring arrangement where the company sells a single invoice to the factor rather than its entire sales ledger. Spot factoring is often used by companies that have occasional cash flow problems or need quick access to cash.


Invoice discounting

This is a type of factoring arrangement where the company retains control of its sales ledger and collects payments from customers. The factor provides financing based on the value of the company's outstanding invoices.



It is important to carefully consider the features and benefits of each type of factoring arrangement before making a decision. Factors such as the company's cash flow needs, the creditworthiness of its customers, and the cost of financing should all be considered.


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