The factor purchases the supplier’s accounts receivable from buyers. If the buyer fails to pay for the delivery, the supplier is obliged to reimburse the factor for the received funds. Recourse factoring is an effective tool for replenishing working capital when selling goods, works, or services.
Recourse is the factor’s right to demand repayment from you if the buyer (debtor) fails to settle the invoice on time. During the grace period, no penalties are charged, and you may fulfill the repayment obligation at any time before the end of this period.
Factoring allows for the use of a grace period — the so-called “waiting period” for the debtor’s payment.
Responsibility is shared jointly between the debtor and you — this is what “recourse” means. At the same time, the repayment term on your side must not exceed the grace period end date specified in the factoring agreement.