Explain and differentiate between recourse and non recourse factoring.
Dear student,
Recourse factoring is an agreement where a company sells its current invoices to a factoring company with the understanding that the company will buy them back if they go uncollected. This factoring plan is generally affordable since the company is agreeing to absorb some of the risk involved in the transaction.
Non-recourse factoring allows a company to sell its invoices to a factor without the obligation of absorbing any unpaid invoices. Instead, if the customers renege on their payments or pay their invoices late any losses are absorbed by the factor, leaving the business unscathed.
Regards
Recourse factoring is an agreement where a company sells its current invoices to a factoring company with the understanding that the company will buy them back if they go uncollected. This factoring plan is generally affordable since the company is agreeing to absorb some of the risk involved in the transaction.
Non-recourse factoring allows a company to sell its invoices to a factor without the obligation of absorbing any unpaid invoices. Instead, if the customers renege on their payments or pay their invoices late any losses are absorbed by the factor, leaving the business unscathed.
Regards