2 min read
Definition
Recourse factoring is factoring where the business remains liable if a customer fails to pay — the factor can reclaim (has recourse to) the advance on any invoice that goes bad. It is cheaper than non-recourse factoring because the factor carries less risk.
In plain terms
You get the cash advance, but if your customer never pays, you must repay the factor. In effect you keep the bad-debt risk while gaining the cash-flow benefit of early payment.
Why it matters
Recourse is the more common, lower-cost option for businesses confident in their customers. See non-recourse factoring.
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