legal
Recourse vs Non-Recourse
Recourse factoring requires you to buy back unpaid invoices; non-recourse shifts customer-default risk to the factor.
Last updated Reviewed by ICG Funding
Definition
What it means.
Under a recourse agreement, if a customer fails to pay an invoice you sold to the factor, you are obligated to repurchase it. Most invoice factoring agreements are recourse because it keeps pricing competitive.
Non-recourse factoring absorbs credit risk on approved customers, but typically excludes dispute-based non-payment, and carries a higher discount rate (usually 1–3 points more per month). For businesses with a concentrated customer base, non-recourse can be worth the premium.
Now what?
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