Recourse financing in leasing allows the lender to ...

Recourse financing in leasing allows the lender to ...

• A. Pursue the borrower personally for deficiency beyond the collateral.
• B. Limit recoveries to collateral only.
• C. Foreclose on any asset of the borrower.
• D. Waive all claims to collateral.

Answer: (A)

Recourse financing in leasing means the lender can pursue the borrower personally for any deficiency beyond the value of the collateral. If the lessee defaults and the sale of the leased asset doesn’t cover the total amount owed, the lender may sue the borrower for the shortfall, using the borrower’s other assets or income to satisfy the debt. This protects the lender by not limiting recovery strictly to the collateral. In contrast, limiting recoveries to collateral describes non-recourse financing, where the lender’s only remedy is the collateral. Foreclosing on any asset of the borrower is broader than the typical recourse arrangement and not what recourse financing guarantees. Waiving all claims to collateral would remove the lender’s protection entirely, which isn’t consistent with recourse financing.

Recourse financing in leasing means the lender can pursue the borrower personally for any deficiency beyond the value of the collateral. If the lessee defaults and the sale of the leased asset doesn’t cover the total amount owed, the lender may sue the borrower for the shortfall, using the borrower’s other assets or income to satisfy the debt. This protects the lender by not limiting recovery strictly to the collateral.

In contrast, limiting recoveries to collateral describes non-recourse financing, where the lender’s only remedy is the collateral. Foreclosing on any asset of the borrower is broader than the typical recourse arrangement and not what recourse financing guarantees. Waiving all claims to collateral would remove the lender’s protection entirely, which isn’t consistent with recourse financing.