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Hello sir, I understand the meaning of credit insurance but im having a little bit of confusion here.
why factoring without recourse provides credit insurance?
Is it because if there is bad debt, it is not company problem anymore. it is the factor.but, why in full recourse theres no credit insurance for factor?
Credit insurance here is referring to the company and not to the factor.
As I explain in my free lectures on this, non-recourse factoring means that the company does not suffer and irrecoverable debts (it is the factor who suffers) and so the company is effectively insured against them.
With-recourse factoring means that the company does suffer the irrecoverable debts and so they are not insured against them.
(Any questions in the exam will refer to them as irrecoverable debts – we stopped using the term bad debts many years ago)
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