The substance of a transfer of accounts receivable arrangement with recourse is more likely to be deemed a borrowing rather than an outright sale in most instances.

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A transfer of accounts receivable arrangement with recourse means that the seller retains the risk of collecting the receivables if the buyer does not pay. This type of arrangement is more likely to be viewed as a borrowing rather than an outright sale because the seller is essentially using the receivables as collateral for a loan. As a result, the substance of the transaction is more akin to a financing arrangement rather than a sale.

The Substance of a Transfer of Accounts Receivable Arrangement with Recourse