Posted by admin in Glossary

The reserve is an amount held back by the factor from the client when purchasing accounts receivable and can be thought of as the equivalent of a reserve for bad debt. As customers pay their balances, the associated reserve may be released to the client or the factoring agreement may call for the reserve to be released upon disposition of all factored accounts receivable. If a debt proves uncollectable, particularly with full recourse factoring, the amount of the debt is first subtracted from the reserve.

One Response to “Reserve”

1. 1
   Factoring with Recourse Pinged With: @8:12 pm 
   

   [...] debt proves to be uncollectible, the full amount of the debt is typically subtracted from the reserve (and, if the reserve is insufficient then the client becomes liable for the unsatisfied amount of [...]

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