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Definition
Non-recourse factoring is factoring where the factor absorbs the loss if a customer fails to pay, subject to the agreed terms — effectively bundling bad-debt protection with the finance. It costs more than recourse factoring because the factor carries the credit risk.
In plain terms
If a covered customer becomes insolvent, the factor bears the loss, not you. This gives certainty against bad debts, valuable for a business with large customers whose failure would hurt, at the price of a higher fee.
Why it matters
Non-recourse suits businesses that want to transfer customer-default risk. See recourse factoring and bad debt.
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