Credit Insurance v Debt Factoring

Is debt factoring the right choice?

Factoring is selling accounts receivable at a discount to a third party – the factoring company. They take on the risk on your behalf, and become responsible for collecting the bill.

What you gain via factoring

With the certainty of payment, albeit a reduced amount, companies can plan with greater confidence.

What you lose, when compared with credit insurance

The first thing you lose is a portion of the amount payable – the discount at which you sold the debt. But you also miss out on all the additional services Coface can provide, that factoring companies don’t:

• Indemnified debt collection service
• Up-to-date financial information on 80 million companies worldwide
• Credit opinions on your current and prospective customers
• Political risk assessments
• Exclusive data on economic and business trends

Another consideration is that the factoring company is very likely to outsource the debt collection and the risk of non-payment to a credit insurance company – so you will still have credit insurance in a sense, but at second hand and without the control you would have over your own policy with Coface.