Dictionary of Banking Terms: limited recourse finance
limited recourse finance
- financing arrangement where the lender can require the borrower to repay only in special conditions that are spelled out in the loan agreement itself, and otherwise must look to the collateral as a source of repayment. Borrowers may have to pay more for limited recourse financing. See also nonrecourse loan.
- indirect lending arrangement where a dealer sells installment sales contracts to a bank, which assumes responsibility for collection of the debt as a holder in due course, and the dealer's liability for losses incurred by the bank is limited by contract. The bank's recourse against the dealer expires after a specified period.
