Account Receivable Purchase Without Recourse
Description
How to fill out Agreement For Sale And Purchase Of Accounts Receivable Of Business With Seller Agreeing To Collect The Accounts Receivable?
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FAQ
Factoring is a financial transaction and a type of debtor finance in which a business sells its accounts receivable (i.e., invoices) to a third party (called a factor) at a discount. A business will sometimes factor its receivable assets to meet its present and immediate cash needs.
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?.
A Factor that executes an invoice purchase agreement with a company without asking the company to repurchase unpaid or past due accounts receivable is automatically non-recourse. In a non-recourse arrangement, the Factor assumes the credit risk and liability of non-payment on a factored invoice.
What is receivables recourse? Recourse factoring involves pledging a company's invoices in exchange for an immediate cash advance. Any non-performing accounts receivable must be paid off by the company or the owners should the factor request payment of the non-performing accounts.
Non-Recourse Factoring: What's the Difference? With recourse factoring, you're responsible for the debt if your customers don't pay. With non-recourse factoring, the factoring company accepts the loss for nonpayment. Randa Kriss is a lead writer and small-business specialist at NerdWallet.