Trade credit insurance vs Non recourse factoring
Both address the risk of a customer not paying, but only one of them also provides cash. Choosing between them starts with whether your problem is protection, liquidity or both.
| Criterion | Trade credit insurance | Non recourse factoring |
|---|---|---|
| Provides funding | No, it is protection only | Yes, advances against invoices |
| Bad debt cover | Insured percentage of approved limits | Funder carries approved buyer insolvency risk |
| Collections | Stay with you | Handled by the funder |
| Customer awareness | Not disclosed | Disclosed through assignment |
| Cost basis | Premium on insured turnover | Service fee plus discount charge |
| Disputes | Generally excluded | Generally excluded |
If cash flow is comfortable and the concern is a single large failure wiping out a year of profit, insurance addresses that directly and cheaply. You keep collections, customers never know, and your commercial relationships are unaffected.
It also supports better funding terms elsewhere. Lenders frequently raise advance rates and concentration limits on an insured ledger, so the premium can pay for itself in released working capital.
Where you need both cash and protection, and lack a credit control function, non recourse factoring delivers all three in one arrangement. Underwriting leans on your customers rather than your balance sheet, so it reaches businesses that could not borrow otherwise.
The trade off is disclosure and control. Customers deal with the funder, and the funder collections approach becomes part of your customer experience.
Neither product covers a commercial dispute. If the customer refuses to pay because of a quality or delivery argument, you are outside cover in both cases and the advance becomes repayable.
Check credit limit mechanics closely. Cover applies only up to approved limits per buyer, those limits can be withdrawn for future shipments, and unapproved balances sit entirely with you. In practice the discipline of working within approved limits is much of the value.
Buy insurance when you need protection but not cash, or when you want to improve the terms of a facility you already hold. Choose non recourse factoring when you need liquidity, protection and outsourced collections in a single arrangement.
Yes. Many invoice discounting facilities are wrapped with a policy the borrower holds, which keeps collections in house while transferring bad debt risk.
Not directly. Both address insolvency and protracted default after a defined waiting period rather than ordinary lateness.
Generally yes, subject to country limits, which vary considerably by market and can be withdrawn.
Not sure which route fits? Describe the requirement once and we will structure it and approach the providers whose criteria match. No upfront fees — charges are due only once funding is in place.
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