Sometimes a business is trying to mitigate the credit risk of their accounts receivables. Although they do not necessarily require the capital advance that a factoring company offers, they would like a third party to carry the responsibility of non-payments. Factoring companies do not serve this function. Invoice factoring is based on advances to creditworthy customers. But there are insurers who take the credit risk and will pay off in particular situations of non-payment.
Insurers like, Euler Hermes ACI, Coface USA, and Meridian will assume the risk of an invoice not being paid – sort of. After paying an annual policy rider, and then a fee for each transaction insured, the insurance kicks in after the insurer has exhausted all avenues of collection and has determined that the reasons for non-payment fall within the policy guidelines. The guidelines are strict and narrow. But just like receivables factoring, receivables insurance has its benefits and is perfectly applicable to certain business scenarios. You can check into it more here and here.