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What is a recourse invoice finance agreement?

A recourse invoice finance agreement is a type of financing arrangement where a business can receive immediate funds by selling its outstanding invoices to a finance company or a factor. In this agreement, the business retains responsibility or recourse for any unpaid invoices. If the customer fails to pay the invoice within a specified time period, the business is obligated to buy back the invoice from the finance company or reimburse the advance provided. The business essentially bears the risk of non-payment by its customers, even after selling the invoices. Recourse invoice finance agreements typically offer lower financing costs compared to nonrecourse agreements, but they also expose the business to a higher level of credit risk.

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