Recourse factoring is set up on an agreement with the company and the factoring company regarding the payment collection. This is also known as discount factoring. Recourse factoring calls for the company to buy back the invoices that are unpaid by the customers. Therefore, the company is still dependent on the quality of the customers they are involved in the business.
Non-recourse factoring takes the risk of collecting the invoices from the customers completely from the company. But it comes with a price. The factoring charges for this type of factoring is higher than that of recourse factoring. This higher price paid is compensated by the risk factoring company takes on the collection end.
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