Recourse and non-recourse funding are two types of financial arrangements that are used in a variety of industries, including real estate, oil and gas, and shipping. Understanding the differences between these two types of funding is important for individuals and businesses seeking to secure financing for a project or venture.

Recourse funding is a type of financial arrangement in which the borrower is personally responsible for repaying the loan. If the borrower is unable to repay the loan, the lender has the right to seize the borrower's assets in order to recover the debt. This means that the lender has "recourse" to the borrower's assets in the event of default.

On the other hand, non-recourse funding is a type of financial arrangement in which the borrower is not personally responsible for repaying the loan. If the borrower is unable to repay the loan, the lender does not have the right to seize the borrower's assets. Instead, the lender can only recover the debt from the collateral that has been pledged as security for the loan. This means that the lender does not have "recourse" to the borrower's assets in the event of default.

There are a few key differences between recourse and non-recourse funding that are important to understand. First, recourse funding is generally considered to be more risky for the borrower, as they are personally responsible for repaying the loan. Non-recourse funding, on the other hand, is generally considered to be less risky for the borrower, as they are not personally responsible for repaying the loan.

Second, recourse funding is often more expensive for the borrower, as the lender charges a higher interest rate to compensate for the increased risk. Non-recourse funding, on the other hand, is typically less expensive for the borrower, as the lender charges a lower interest rate due to the reduced risk.

Finally, recourse and non-recourse funding are used in different types of financing situations. Recourse funding is often used in real estate and other types of secured lending, while non-recourse funding is more commonly used in asset-based financing, such as in the industry of pre-settlement financing, lending, oil and gas industry.

In conclusion, recourse and non-recourse funding are two different types of financial arrangements that are used in a variety of industries. Understanding the differences between these two types of funding is important for individuals and businesses seeking to secure financing for a project or venture.