Agreement Accounts Receivable Without Recourse In Texas
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In non-recourse receivables finance, the factor purchases the receivables from the seller and assumes the full debtor default risk. In a recourse transaction, the debtor default risk remains with the seller. Receivables purchased under a non-recourse agreement can generally be removed from the seller's balance sheet.
When a company factors receivables it means that they sell them to another party. If the transaction is without recourse that means the buyer takes on all the risk of credit losses. The seller of the accounts receivable does not bear any risk after the sale is complete.
Factoring without recourse means that the risk of accounts receivable being uncollectible transfers from the buyer to the seller. Basically, if an accounts receivable cannot be collected, the seller does not have to reimburse the buyer like they would if the factoring was “with recourse”.
SALE OF RECEIVABLES: A DEFINITION In selling the Receivable without recourse the seller guarantees only the existence and validity of the receivable at the time in which the sale is made.
Receivables finance can be provided to the seller on a “non-recourse” or “recourse” basis. In non-recourse receivables finance, the factor purchases the receivables from the seller and assumes the full debtor default risk. In a recourse transaction, the debtor default risk remains with the seller.
Factoring without recourse means that the risk of accounts receivable being uncollectible transfers from the buyer to the seller. Basically, if an accounts receivable cannot be collected, the seller does not have to reimburse the buyer like they would if the factoring was “with recourse”.
