Recourse

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DEFINITION of 'Recourse'

A legal agreement by which the lender has the rights to pledged collateral in the event that the borrower is unable to satisfy debt obligation. Recourse refers to the legal right to collect.

BREAKING DOWN 'Recourse'

Recourse lending provides protection to lenders, as they are assured to have some sort of repayment - either cash or liquid assets. Companies that issue recourse debt have a lower cost of capital, as there is less underlying risk in lending to that firm.

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