Credit insurance and factoring

Many companies factoring their invoices also wish to take advantage of credit insurance or bad debt protection and this can be achieved in one of two ways. Some factoring companies offer a non recourse factoring facility, which as the name suggests is without recourse to the client in the event of the failure of the customer.

The factoring company will underwrite individual credit limits on each customer and will accept the bad debt loss in the event of  the insolvency of that customer up to the agreed limit..

The advantage of this facility is that the client only has to deal with one company but the disadvantage is that the credit limits on offer can sometimes be restrictive as the factoring company will look at it’s own overall indebtedness to a company and when it feels that the overall exposure is high enough will probably cease to underwrite new limits. This means that a factoring company’s client wishing to sell on an insured basis to a well known name may find that he can only obtain a derisory limit as the factoring company has reached it’s own limit

An alternative is a factoring facility without credit cover plus a separate credit insurance policy as this has the advantage of greater flexibility. There are a number of credit insurance companies in the market place all having different strengths and weaknesses and the art is knowing which insurer will give the best levels of cover at the most competitive cost.

Whilst Factoring Solutions deal with most of the better non recourse factoring companies we also have a relationship with a credit insurance broker who knows the insurance market as intimately as we know the factoring market and they can place the credit insurance with the most appropriate underwriter for the type and size of company which should result in higher credit limits at lower cost.

Packaging the factoring and credit insurance elements separately allows for maximum flexibility in choice, coverage and cost and as there are no charges for our services why not contact Factoring Solutions on 01827 707680 for an informal chat without any obligation whatsoever.

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