# Recourse vs. Non-Recourse

> Recourse means a lender can pursue your other assets if collateral or pledged receivables don't cover what you owe, while non-recourse limits the lender to the specific collateral and absorbs certain losses themselves.

## Key takeaways
- With recourse financing the lender can pursue your other assets for any shortfall, while non-recourse generally limits their claim to the specific collateral or receivables pledged.
- The distinction is clearest in invoice factoring: recourse means you buy back unpaid invoices, while non-recourse shifts insolvency risk to the factor at a higher cost.
- "Non-recourse" is rarely absolute, since most agreements carve out fraud, misrepresentation, or disputed invoices and usually cost more or advance less.

## How recourse and non-recourse differ

The terms **recourse** and **non-recourse** describe what a lender or finance
company can do if the deal goes bad and the collateral isn't enough to cover the
balance.

With **recourse** financing, the lender keeps the right to pursue you — and often
your other business or personal assets — for any shortfall. With **non-recourse**
financing, the lender's claim is generally limited to the **specific collateral
or receivables** pledged; if that falls short due to covered events, the lender
absorbs the loss.

### Where you'll see it

The distinction shows up most clearly in **invoice factoring**:

- **Recourse factoring:** if your customer doesn't pay, you typically have to buy
  the invoice back or replace it. It's more common and usually cheaper.
- **Non-recourse factoring:** the factor takes on the risk of a customer's
  insolvency, so it costs more and the factor scrutinizes your customers closely.

It also applies to equipment financing and other secured deals, where
non-recourse structures limit the lender to the financed asset.

### What to watch for

- **"Non-recourse" is rarely absolute.** Most agreements carve out fraud,
  misrepresentation, breach of warranty, or disputed (vs. uncollectible)
  invoices — so you can still be liable in those cases.
- Non-recourse usually means **higher fees or lower advance rates** because the
  lender carries more risk.
- Read what triggers recourse: a 90-day non-payment clause is very different from
  protection only against bankruptcy.

If you're comparing factoring or secured options, Hoss Capital can help you see
where the risk actually sits before you sign.

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