In recourse factoring, the factoring company pays advances for receivables before maturity that are assigned to it. Financing is provided until the customer pays the receivable to the account of the factor, but no later than at the end of the recourse period. The recourse period is a set in days and starts from the maturity date of the receivable. The maximum recourse period is 90 days after maturity; this is usually shortened by the factoring company in order to reflect the risk of the client (supplier) and the customers.
If the receivable is not paid by the customer, the factor returns the receivable to the client upon the elapse of the recourse period for a commercial resolution - collection. At the same time, the factor demands the return of the advance financing it has provided.
Recourse factoring (or factoring without insurance) is a good option for financing receivables from “trouble-free” customers who have a track record of paying their invoices on time, usually within 30 or max. 60 days from the maturity date. It is preferred solution when the supplier has cooperated with a customer in the long term and when there are no concerns about its payment discipline.
Recourse factoring remains the most frequently used service in the Czech Republic and Slovakia, becoming increasingly popular for its low price that is fully comparable to a bank loan.
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