You offer financing to close deals your customers cannot afford to pay upfront. The finance company pays you. Then the customer stops paying them. You want to know what happens next, and whether you are still getting paid.
This matters more in service industries where the work happens over months or years. Tax resolution. Timeshare exit. Solar exit. A customer who stops paying four months in may claim they are not getting results. The finance company wants their money. You want to know if this becomes your problem.
How the Finance Company Gets Paid
When a customer finances a purchase through merchant financing, they sign an installment contract. The finance company buys that contract from you. They pay you directly, usually within days.
The customer now owes the finance company, not you. The finance company collects payments over time. They take the credit risk. They handle the servicing. You have already been paid.
When a customer stops paying, the finance company follows their own collections process. They may call. They may send letters. They may report to credit bureaus. They may pursue legal remedies depending on the amount and the jurisdiction.
What happens to you depends on whether your agreement with the finance company includes recourse or not.
Recourse and Non-Recourse Structures
Recourse means the finance company can come back to you if the customer does not pay. You may owe them money. You may need to buy the contract back. The specific terms vary by agreement.
Non-recourse means the finance company cannot come back to you. They accept the full credit risk. If the customer stops paying, you keep what you were paid. The finance company absorbs the loss.
Most finance companies use a mix. They may offer non-recourse terms for well-qualified customers and recourse terms for higher-risk accounts. They may offer partial recourse, where you share a percentage of the loss. The structure depends on your industry, your customer profile, and the finance company's appetite for risk.
We do not promise one structure or another. We connect you with the right finance company for your industry, and we explain the terms before you agree to anything.
Why Service Merchants Face Different Terms
Service merchants often see more recourse than product merchants. The reason is simple. A consumer who finances a golf cart takes delivery of a physical asset. A consumer who finances a timeshare exit or tax resolution service receives work over time.
If the service takes six months and the customer stops paying after three, the finance company wonders whether the work was completed. They wonder whether the customer is justified in stopping payment. They may ask you to demonstrate that you fulfilled your obligations.
Finance companies price for this uncertainty. Some will not lend to service merchants at all. Others will, but they structure the deal to protect themselves. That may mean recourse. It may mean a holdback. It may mean stricter underwriting.
This is not personal. It is risk management. The finance companies that do work with service merchants are specialists. They understand your industry. They know how to evaluate these deals. They have seen the patterns.
What You Should Ask Before You Sign
Ask whether the financing structure is recourse or non-recourse. Ask what happens if a customer stops paying. Ask whether there is a holdback period. Ask what documentation you need to provide if a customer disputes the charges.
You should understand the answer to every one of these questions before you sign an agreement. A good broker will walk you through them without making you ask. We hold your hand through the process because we want you to know what you are agreeing to.
You should also ask how the finance company handles chargebacks and disputes. Some service industries attract more disputes than others. If your industry has a reputation problem because of bad actors, the finance companies know it. They will price accordingly.
The right finance company will explain their process clearly. They will tell you what to expect. They will not surprise you six months later when a customer stops paying.
How We Help Merchants Understand the Terms
We work with finance companies that specialize in service merchants and product merchants. We know which ones accept recourse and which ones do not. We know which ones will work with your industry and which ones will not.
When we connect you with a finance company, we explain the terms in plain language. You get paid. Your customers get options. But you also understand what happens if something goes wrong.
We do the due diligence on the front end so you do not waste time with finance companies that will not approve your business model. We give you one relationship. One point of contact. White glove service from start to finish.
If you want to understand how merchant financing works in your industry, and what recourse terms you can expect, we can walk you through it. It is a relationship, not just a transaction.