Recourse (receivables finance)

BY MICHAEL SHANG · SIXTEEN YEARS IN COMMERCIAL BANKING · UPDATED 2026-11-01

// THE SHORT ANSWER

Recourse is the financier's right to come back to its own client when the debtor does not pay: under recourse invoice finance, an invoice still unpaid after a set period is recycled back to the client and its advance repaid; under recourse discounting of a letter of credit, the bank can claim the advance back from the exporter. Recourse is cheaper because the client keeps the credit risk of its customers, and that risk stays on its balance sheet as a contingent liability. Non-recourse finance moves the risk to the financier, usually with credit insurance behind it, and is priced for it.

BASIS  Practitioner judgment from sixteen years in commercial banking, set out in How Bankers Think (Highbank Press, 2026). Every borrower on this site is a composite constructed for teaching, not a client. The market is mid-market commercial lending as practised in New Zealand and Australia; where a convention differs elsewhere, the page says so.