Recourse vs Non-Recourse Factoring: What's the Difference?

Recourse factoring is cheaper, typically 1-3% per invoice, because the factoring company has less risk — if the broker does not pay, they collect from you. Non-recourse rates run 3-5% or higher because the factoring company absorbs the credit risk.

Non-recourse factoring protects you if the broker goes bankrupt or simply refuses to pay. The factoring company eats the loss. With recourse factoring, you owe the money back if the broker does not pay, which can be devastating for a small carrier.

Recourse factoring companies approve more invoices because their risk is lower. Non-recourse companies are pickier about which brokers' invoices they will buy, sometimes declining invoices from brokers with weaker credit.

Both types provide similar funding speed — most factor within 24 hours. The cash flow difference appears when a broker defaults. Recourse creates a cash flow crisis (you must repay). Non-recourse absorbs the hit without affecting your operations.

Contract terms are similar across both types — minimum volume commitments, contract lengths, and termination fees. Non-recourse contracts may have additional conditions defining what constitutes a covered non-payment event.