"When utilizing a Factor to sell your receivables, all could be true except"

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BlackTom AI · Accepted Answer

In questions about selling receivables to a factor, several statements could be true depending on the terms of the factoring arrangement. 
Option B: 'They must be sold without recourse back to the selling company.' This statement is not universally true, because factoring can be done with or without recourse. In a recourse arrangement, the seller retains the risk of non-payment, and the factor can seek repayment from the seller if a receivable proves uncollectible. 
If the question is asking for the exception (the statement that could be false), the idea that receivables must be sold without recourse is too restrictive and not a requirement of all factoring agreements. Many factors offer recourse or mixed forms, and the choice depends on negotiated terms, the seller’s credit, costs, and risk tolerance. 
Why the other possibilities (if any) could be true: while not provided here, standard statements often include that factors advance a portion of the invoice, that fees or factoring charges apply, or that the agreement specifies notification and assignment of receivables. Each of those are common elements of factoring, though exact terms vary by contract. 
Key misconceptions to avoid: assuming a universal recourse-free sale ignores the risk allocation practices in factoring; assuming there is always recourse ignores non-recourse products and the price premium those would entail.

33:390:430:90 TREASURY MANAGEMENT Quiz Chapter 3 - Banks and Financial Institutions

"When utilizing a Factor to sell your receivables, all could be true except"

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