When you are working to establish an accounts receivable factoring relationship, you should understand the details of the contract. In particular, you need to know the difference between recourse and non-recourse factors.
With a recourse factoring arrangement, you are required to replace a bad debt with a new receivable of a like amount (or refund the advance back to the factoring company). With a non-recourse facility, that requirement is not made unless it is determined that either the services or products weren't received by the customer or fraud was involved. When reviewing proposals, it is very important to keep these factors in mind.
December 13, 2007
Recourse and Non-Recourse Invoice Factoring
Posted by
Kent Harlan, CPA
at
7:36 AM
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