Updated 2026-05-19

Recourse period

The window after which an unpaid invoice triggers a repurchase obligation.

Why it matters

The recourse period clock starts at different points depending on the contract: invoice date, due date, or funding date. After the period expires without payment, the factor can require the seller to repurchase the invoice, use reserve funds, or provide a replacement invoice. Understanding when the clock starts is critical for sellers whose customers have long payment terms. An invoice with 90-day payment terms submitted to a factor with a 90-day recourse period from invoice date may trigger chargeback before the payment is even due from the customer.

How it appears in contracts

The recourse period is defined in the Recourse or Chargeback section of the factoring agreement. The agreement specifies both the length of the period and the starting point: some use the original invoice date, others use the invoice due date, and others count from the funding date. The agreement also defines the consequence of the period expiring: whether the chargeback is automatic or requires the factor to issue a written demand. For programs with multiple repayment options, the agreement should specify the order of preference and any conditions on each option.

Related terms

• Notice of assignment
• UCC-1
• Lockbox
• Assignment of receivables