ACCA FM · Chapter 4 · Question 8 of 12
A factor provides a 'with recourse' service. What does this mean?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: D) The company bears the loss if a customer whose debt has been factored fails to pay
Explanation
Under recourse factoring, the risk of bad debts remains with the client company: if a customer defaults, the factor recovers the amount advanced from the company. With non-recourse factoring the factor bears the bad debt risk, for a higher fee. Not telling customers is a feature of confidential invoice discounting.
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