Few provisions in equipment finance carry more comfort per page than vendor recourse. The program agreement’s recourse section — the repurchase obligation, the first-loss pool, the ultimate-net-loss guarantee — converts, in the credit committee’s imagination, a portfolio of small-business exposures into something backstopped: the vendor stands behind the paper. Programs get approved on it, pricing gets sharpened against it, and concentration comfort gets built on it. The industry’s workout files, meanwhile, keep a quieter ledger — what recourse actually paid, when, after what dispute — and the two ledgers disagree so consistently that the disagreement deserves an essay: vendor recourse is simultaneously worth less than the industry prices it for and more, because it performs two different functions, and almost no one values them separately.

Function one: the payment. Worth less.

As a source of loss reimbursement — the function the credit file prices — recourse underdelivers with a reliability the recovery data makes uncomfortable. The reasons stack. Correlation first, and worst: the scenarios in which recourse is needed at scale are the scenarios in which the vendor’s own business is under the same stress that broke the obligors — the equipment maker whose customer base is defaulting is a company whose dealer network is shrinking, whose margins are compressed, and whose capacity to honor a recourse pool has deteriorated in lockstep with the demand for it. Recourse is a claim on vendor solvency, purchased for use in exactly the states of the world where vendor solvency is scarcest; the industry’s program post-mortems from prior downturns document the pattern — recourse recoveries realized at a fraction of contractual entitlement, concentrated in the programs that needed them most.