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What does a factoring company do in the case of nonpayment?

If a customer refuses to pay the debt to a factoring company it is termed as a dispute. Factoring companies will do all they can to resolve a dispute within a reasonable timeframe, using a range of debt collection practices. However, if a debt cannot be recovered or the debtor has become insolvent there are two ways that the factor can proceed. With a non-recourse factoring agreement, the factor offers bad debt protection and will take on the debt themselves and credit the invoice. With a recourse factoring agreement, the business issuing the invoice is liable to pay the factor for any outstanding debts and the invoice will be reassigned back to them.

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