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What is A Recourse Period?
In the context of accounts receivable factoring, the “recourse period” refers to a specific duration during which the factor (the entity providing the financing) can seek repayment from the seller (the business selling its receivables) in case the customer fails to pay the invoice. Typically, during the recourse period, if the customer does not pay the invoice, the factor can “recourse” or return the unpaid invoice back to the seller, who then becomes responsible for repaying the factor. The length of the recourse period can vary depending on the terms of the factoring agreement and can have implications for the risk and cost associated with the factoring arrangement.
RELATED TERMS
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A factor is an intermediary that offers companies immediate cash or financing by buying their accounts receivables. Essentially, a factor is a financial entity that agrees to provide the company with the value of an invoice, deducting a certain amount…
- Factoring
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