What Type of Factor is DB Squared?

DB Squared is a Non-Recourse Factor. DB Squared assumes the risk for collecting payment on the invoice from the customer who purchased the goods and services from your business. When deciding to factor invoices it is important to note that there are two different forms of factoring, Recourse and Non-Recourse.

What is Non-Recourse Factoring

Non-Recourse Factoring is less common in the factoring world today due to the risk the factor is exposed to. Essentially, when a Non-Recourse Factor purchases an invoice they are assuming the credit risk on that invoice. Non-Recourse Factoring is where a business sells an invoice to a Factor and is not required to buy the invoice back from the Factor if it goes uncollected for a fixed number of days.

If the customer of the business is unable to pay the invoice, a Non–Recourse Factor will assume all of the risk and absorb the loss. The business that chose the Non–Recourse Factor has no responsibility to pay for that invoice if it is not paid by the customer as agreed.

What is Recourse Factoring?

Recourse Factoring is the most common form of Factoring in the United States. When a Recourse Factor purchases an invoice they are not assuming the credit risk on that invoice. Recourse Factoring makes the business responsible for the credit worthiness of its customers. If the customers of the business is unable to pay the invoice, the business is responsible for buying back the invoice from the Factor. The business is left with the responsibility of collecting on that invoice as well as paying any legal fees associated with that collection.