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Recourse and Non-Recourse Nurse Staffing Accounts Receivable Factoring: What’s the Difference?

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By Phil Cohen

Accounts receivable factoring is quite common in the temporary nurse staffing industry these days. It’s an excellent way for nurse staffing agency owners to bridge the cash flow gap that’s created when their clients (hospitals, nursing homes and vendor management systems) take months to pay for the staffing services. However, as common as nurse staffing accounts receivable factoring is, one of the most misunderstood concepts of the financing arrangement is the difference between recourse and non-recourse factoring.

What is nurse staffing recourse factoring?

For the most part, recourse factoring is the most common and the most affordable nurse staffing financial help available to nurse staffing business owners. In this type of factoring arrangements, the nurse staffing accounts receivable factoring company will require an agency owner to buy an invoice back if the client does not pay within a specified amount of time. Moreover, the nurse staffing agency owner accepts full credit risk for any and all accounts receivables that it sells to the factoring company.

What is nurse staffing non-recourse factoring?

The other accounts receivable factoring option that nurse staffing agency owners have is non-recourse factoring. In a nutshell, non-recourse nurse staffing financing agreements hold the factor entirely responsible for unpaid invoices if the following is true:

  • If the hospital, nursing home or vendor management system (VMS) goes bankrupt during the time an agency owner’s invoice was factored.
  • If the hospital, nursing home or VMS goes out of business during the time an agency owner’s invoice was factored.

It’s important to keep in mind that non-recourse accounts receivable factoring does not cover the following situations:

  • Very late payments when there is no insolvency
  • Disputes/challenges with nurse staffing services
  • General collections issues

Naturally, both options have pros and cons that a nurse staffing agency owner should consider before choosing which type of agreement to make. Typically, a nurse staffing financing will result in lower factoring fees and/or higher advance rates if they choose to enter into a recourse factoring relationship. On the other hand, a non-recourse accounts receivable factoring arrangement buys nurse staffing business owners’ protection if a hospital nursing home or VMS goes bankrupt. Ultimately, agency owners need to review their accounts receivable factoring contract in detail with a lawyer to determine which type of arrangement, recourse or non-recourse, is the best fit for their agency.

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Phil Cohen

About the author

Philip Cohen is the founder and President of PRN Funding, LLC. PRN Funding is an extraordinarily focused niche player in healthcare funding. With years of…... Read More

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