Differences in recourse rights
Recourse factoring: No matter what causes the accounts receivable to be uncollectible, the factoring company can exercise recourse against the seller.
Non-recourse factoring: according to the contract. Generally speaking, the right of recourse is waived only when the buyer has credit risk, and the factoring company still enjoys the right of recourse against the seller when the accounts receivable cannot be recovered due to commercial contract disputes. Therefore, non-recourse factoring is only relative, and there is no non-recourse in the full sense.
Appearance difference
According to the Accounting Standards for Business Enterprises No.23-Transfer of Financial Assets, if an enterprise transfers almost all risks and rewards in the ownership of a financial asset, it shall stop recognizing the financial asset.
Recourse factoring: after the transfer of accounts receivable, the seller has to bear the responsibility of repurchase, so the risks and rewards of accounts receivable have hardly been transferred, and the confirmation cannot be terminated, that is, the statement cannot be realized.
Non-recourse factoring: after the transfer of accounts receivable, the seller only assumes the repurchase responsibility under certain conditions, so the risks and rewards of the accounts receivable have almost been transferred, and the confirmation can be terminated, that is, the statement can be realized.
: 1. What is recourse?
The right of recourse refers to the holder's right to ask his prior party to repay the bill amount and related losses and expenses when the bill is dishonoured at maturity or for other legal reasons. The right of recourse is the holder's right to recover from the debtor of the bill when the creditor's right to pay cannot be met. It is a system to make up for the limitation of payment right on the realization of holder's bill rights. In the process of financial activities and bill circulation, when the payer refuses to pay, the holder has the right to recover the bill money from the endorser and drawer.
In the process of bill circulation, if the payer refuses to pay when the holder of the due bill asks for the payable bill and cashes the bill, he may apply to the court where the payer is located (or other legal drawer) for proof of the payer's refusal to pay, and then ask the bill endorser for the bill. The amount is the bill amount plus interest plus refusal fee. After the requested person has paid the amount, it can be recovered from the original hand until the cashier is recovered. If the endorser of a bill wants to be exempted from this responsibility, he may indicate in the endorsement that there is no recourse.