Recourse Debt Factoring
Debt Factoring refers to the sale of
receivables from a business to a specialized finance company
known as a factor. The sale takes place at an agreed discount
and once completed the factor must collect receivables from the
Factoring agreements can either be recourse factoring
non-recourse factoring agreements.
With recourse debt factoring, the factor does not assume the
risk of bad debts. A factoring agreement will stipulate when
receivables are considered uncollectible and the procedure for
repaying the factor.
Recourse factoring carries less of a discount than
non-recourse factoring since the business retains the risk of