The type of factoring under which the factor collects

Solution

Factoring is an arrangement wherein the organization can convert its debtors, into realization of an upfront cash by delegating the work of collection from the debtors to an outside party or selling the debtor invoice to a third party financier in return of a fee. ·       Factoring with Recourse - In case of non-payment of the invoice value by the debtors, the Factoring company can collect the invoice value from the client. So the risk of non-payment by debtor falls on the client itself. ·       Factoring without Recourse - In case of non-payment of the invoice value by the debtors, the Factoring company cannot collect the invoice value from the client. So the risk of non-payment by debtor falls on the factor and not the client.