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Non-recourse factoring should not be confused with making a loan. [ 13 ] [ 1 ] When a lender decides to extend credit to a company based on assets , cash flows , and credit history, the borrower must recognize a liability to the lender, and the lender recognizes the borrower's promise to repay the loan as an asset.
With non-recourse factoring, the factoring company is liable for the debt if the client doesn’t pay. Since the factoring company takes more of a risk, non-recourse factoring tends to have higher ...
Non-recourse factoring. Most common option. Requires the business owner or operator to shoulder the responsibility of unpaid invoices. If a client doesn’t pay the invoice by the due date, the ...
Export factoring is a highly specialised and selective form of factoring, and can provide non-recourse funding to exporters, paid at the time of shipment, and with solvency of the overseas importer underwritten by an overseas bank or institution.
Recourse debt or recourse loan is a debt that is backed by both collateral from the debtor, and by personal liability of the debtor. [2] This type of debt allows the lender to collect from the debtor and the debtor's assets in the case of default, in addition to foreclosing on a particular property or asset as with a home loan or auto loan.
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The reverse factoring method, still rare, is similar to the factoring insofar as it involves three actors: the ordering party (customer), the supplier, and the factor. Just as with basic factoring, the aim of the process is to finance the supplier's receivables by a financier (the factor), so the supplier can cash in the money for what they sold immediately (minus any interest the factor ...
As you say yourself, US GAAP is the American treatment, and referring to the US accounting treatment will make this article US-centric and, in my opinion, less useful - particuarly to non-US readers. A far better approach is to have the article explain what factoring is (and, if necessary, explain the difference between factoring and invoice ...