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What is recourse?

April 26, 2017recourse

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What is recourse?

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Recourse loans are sold with an option to return all outstanding principal, triggered by delinquency or other stipulations defined in the Loan Participation Agreement. These are usually offered at a discounted rate of return and for loans considered higher risk.

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Most clients agree to repurchase any invoice that has not paid at the end of 90-days and this is known as factoring with recourse. The client becomes responsible for collecting any amounts unpaid after 90-days. PCG offers both full recourse and non-recourse factoring. In non-recourse factoring, PCG assumes all the credit risk and if an invoice does not pay, the client has no obligation to repurchase it. The non-recourse option is generally available only to those doing business with large, credit worthy companies and generally commands a higher factor rate. Even non-recourse items are subject to client repurchase if an order is returned, disputed or fraud is involved.