Non-recourse factoring transfers specified customer credit risk to the factor for eligible receivables under the factoring agreement. The factor cannot return a covered receivable solely because the approved customer becomes insolvent or fails to pay for a covered reason.
How does Non-Recourse Factoring work in practice?
The factor purchases approved receivables and assumes the defined risk that the debtor cannot pay for an insured or covered credit reason. The seller normally remains responsible for disputes, returns, fraud, invalid invoices and other exclusions. A non-recourse label therefore must be read together with the credit limits, exclusions and recourse events in the agreement.
What records support Non-Recourse Factoring?
Keep credit approvals, covered debtor limits, exclusions, dispute records, assignments and evidence supporting each funded invoice.
What does Non-Recourse Factoring not establish?
Non-recourse does not mean risk-free. Dilution, fraud, breach of warranty and commercial disputes commonly remain with the seller.
