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Is there any collateral requirement for factoring?


As with all financial services, some criteria do need to be met in order to ensure that the factoring contract will be beneficial and sustainable. Invoice factoring is a form of lending, and as such, you may need to provide collateral to guarantee repayment of a cash advance, if the debt cannot be collected on an invoice. However, this may only be required if you are trading with customers with a bad credit history and normally only with recourse factoring agreements (where any bad debt remains the responsibility of your business), so it is certainly not a guaranteed prerequisite. Make sure you check your offer terms and contract thoroughly for any collateral requirements.

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An additional question: Respond to this Question

  • Why turn to a factor rather than seek a bank loan?
  • How does a factoring finance arrangement work?
  • Who collects the debt due, the factor or my business?
  • What's the difference between factoring with recourse and factoring without recourse?
  • Does factoring require a minimum number of invoices?
  • What does a factoring company do in the case of nonpayment?
  • Do my customers know of the factor’s involvement?
  • What are the requirements for invoice discounting?
  • How quickly can I access cash for the invoices I sell to a factor?
  • Who do I turn to if I have a dispute with my factoring company?
  • I have overseas clients; can I factor international invoices?
  • Is it easy to terminate a factoring arrangement?
  • What regulations apply to factoring companies?
  • What does working capital mean to your business?
  • What is the difference between factoring and bill discounting?
  • What is credit insurance?
  • What is export factoring?
  • What is the difference between invoice factoring and merchant cash advance?
  • What is the difference between factoring and securitisation?