Recourse

If the customer does not pay within the recourse period, the seller has to buy the invoice back or provide a replacement. The factoring company's loss protection is limited to fraud prevention and collection assistance.

Why it matters

Under recourse factoring, the seller retains the risk of customer non-payment. This is the most common structure and typically carries lower fees. An unpaid invoice beyond the recourse period results in a repurchase obligation that is satisfied from the reserve, requires a cash payment, or is offset with a replacement invoice. Businesses with reliable customers and low default history are good candidates for recourse programs.

How it appears in contracts

Recourse obligations appear in the 'Repurchase' or 'Reassignment' section. Look for: (1) the recourse period length—typically 60 to 120 days after the invoice due date, though some contracts measure from the funding date rather than the due date; (2) the mechanics of repurchase—whether it is satisfied by a cash payment, a reserve deduction, or submission of a replacement invoice of equal value; (3) who bears collection costs during the period before recourse is triggered; and (4) whether the factor can declare recourse early if the debtor has filed for bankruptcy or communicated an intent not to pay.

Related terms

Related article: What is invoice factoring?

Related reading

Sources

  • International Factoring Association - International Factoring Association. Accessed 2026-05-19. Industry association source for factoring terminology and industry context.
  • Secured Finance Network - Secured Finance Network. Accessed 2026-05-19. Industry education source for secured finance and asset-based lending context.
Financial disclaimer. This page is educational only and is not financial, legal, tax, accounting, or credit advice. Factoring terms vary by provider and contract. Read the full disclaimer.