In non-recourse factoring, who absorbs losses when customers fail to pay invoices?

• A. The seller
• B. The factor
• C. The customer
• D. The carrier

Answer: (B)

The key idea is who bears credit risk. In non-recourse factoring, the factor takes on the risk that a customer might not pay. When an invoice goes unpaid, the loss sits with the factor, not the seller. The seller gets advance cash for the invoices but isn’t responsible for bad debts under this arrangement. The customer is simply the debtor who owes the money, and the carrier isn’t involved in the credit risk. (Note: there can be exceptions like fraud or disputed invoices, but the standard rule is that the factor absorbs the losses.)