FAQ: What is the difference between a Recourse and Non-Recourse Debtor Finance Facility?
What is the difference between a Recourse and Non-Recourse Debtor Finance Facility?
A Recourse Debtor Finance Facility is the advance of funds against unpaid outstanding invoices where the credit risk remains with the supplier company. In the event of bad debt (where the invoice is not paid by the customer) the supplier company would have to pay back the funds advanced by the financier.
A Non-Recourse Debtor Finance Facility is the advance of funds against unpaid outstanding invoices where the credit risk is transferred to the finance company. In the event that the invoice is not paid by the customer the bad debt is covered by insurance - the supplier company does not need to repay the advanced funds. For this reason, Non-Recourse Facilities are often more expensive and more restrictive than Recourse Facilities.
Please note that this information is of a general nature only. You should consult an accountant to obtain information specific to your situation.
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