The difference is who carries the loss when a customer does not pay. Under recourse factoring it is you: if the broker has not paid after the recourse period your contract sets (a number of days), you buy the invoice back. Under non-recourse it is the factor, but in most contracts only when the broker or shipper cannot pay because it is insolvent, not when it refuses to pay over a dispute.
This page is for owner-operators and small fleets comparing two factoring offers, one of each kind. It ends with a calculator that tells you, with your own volume and rates, whether the extra price of non-recourse pays for itself.
Recourse and non-recourse factoring, side by side
| Recourse | Non-recourse | |
|---|---|---|
| Broker goes out of business | You buy back the invoice | The factor takes the loss |
| Broker disputes the load | You buy back the invoice | Usually you buy it back too |
| Broker simply pays late | You pay the fees for the extra days, then buy back the invoice when the recourse period ends | You pay the fees for the extra days; the factor takes the loss only if the broker is found insolvent |
| Rate | Lower | Higher |
| Which brokers you can factor | Most, at your risk | Only those the factor approves |
To see what each rate costs you in dollars and as an annual rate, run both offers through the freight factoring cost calculator.
What non-recourse factoring really covers
The word "non-recourse" sounds like full protection, but it covers one risk: a customer who cannot pay. Most non-recourse contracts define a covered loss as the customer's inability to pay: bankruptcy, closure, or an insolvency the factor can document. They leave out, or send back to you:
- disputes over the load (shortage, damage, late delivery, rejected freight);
- missing or wrong paperwork, such as an unsigned bill of lading;
- loads hauled for a broker the factor had not approved;
- deductions the broker makes for claims or chargebacks.
That is why the calculator asks what share of your losses the contract would really cover. If half of the money you lost last year came from disputes, a non-recourse contract would have covered, at most, the other half.
Is non-recourse worth the higher rate?
Non-recourse pays for itself when the losses it would cover are larger than what you pay on top of the recourse rate. Enter a year of factored invoices and both rates.
How it works: extra cost = invoices × (non-recourse rate − recourse rate). Covered losses = invoices × loss rate × share covered. The break-even loss rate is the rate difference divided by the share covered: above it, non-recourse is cheaper.
Worked example
The rates and loss rates here are made up to show the method, not market averages. A small fleet factors $500,000 a year. Recourse costs 2.5% and non-recourse 3.5%, so non-recourse costs $5,000 more a year. If 0.5% of invoices go unpaid because brokers fold, that is $2,500 of losses: $5,000 − $2,500 means recourse is cheaper by $2,500. With full cover, the break-even loss rate is simply the 1-point rate difference: 1%.
Now say 3% of invoices go unpaid, but only half of that is insolvency and the rest is disputes. Non-recourse covers $7,500 and costs $5,000 extra: it saves $2,500. The break-even point moves from 1% to 2%, because 1% ÷ 50% = 2%: only half of the losses count.
One thing the dollars do not show is cash flow. Under recourse, a broker that folds owing you several loads means buying them all back at once, often out of the reserve. If one customer is a big share of your billing, that risk alone can justify non-recourse.
What to read in the contract before you sign
- Definition of a covered loss: the exact words that turn an unpaid invoice into the factor's loss.
- Recourse period: how many days a broker can take before you must buy back the invoice, and what is charged in between.
- Approved brokers: how the factor approves them, and what happens to a load hauled for one that is not approved.
- Buy-back method: paying cash, handing over another invoice of the same value, or letting the factor deduct it from the reserve or from what it pays you on your next loads.
- Reserve: the part of each invoice the factor holds back until the broker pays. Check how much it is and when it is released, since a buy-back is often taken from it.
The broker bond: protection that exists either way
Every licensed freight broker must keep a $75,000 surety bond or trust fund in place (49 CFR 387.307). If a broker fails to pay, a carrier, or the factor that bought the invoice, can make a claim against it. That limit is shared by every unpaid claimant, so it may not cover your invoice in full when a large broker fails. Before you haul, you can check a broker's registration and bond on the FMCSA's public Licensing and Insurance search.
Questions about recourse and non-recourse factoring
What is non-recourse factoring?
It is factoring where the factor, not you, takes the loss if your broker or shipper cannot pay because it has gone out of business or into bankruptcy. You still answer for the load itself: if the customer refuses to pay because of a dispute over the delivery, most contracts send that invoice back to you.
What is recourse factoring?
With recourse factoring you sell the invoice, but if the customer does not pay within a set number of days you have to buy it back, replace it with another invoice or let the factor deduct it from your next payments. Because you keep the risk, the rate is usually lower.
Is non-recourse factoring more expensive?
Usually yes, because the factor prices in the losses it may absorb. Whether it is worth it depends on how often your customers fail to pay because of insolvency. The calculator on this page shows the break-even point for your own numbers.
Does non-recourse factoring cover disputes?
In most contracts it does not. Non-recourse normally covers only credit risk, meaning the customer is unable to pay. Short deliveries, damaged freight, late loads or paperwork problems are usually your responsibility under both kinds of contract. Check the definition of a covered loss before you sign.
Which is better for a new trucking company?
It depends on who you haul for. A new carrier that hauls for many small brokers carries more credit risk, which makes non-recourse more useful. A carrier that works mostly with large, well-rated brokers may save money with recourse and a credit check before each load.
Sources
- Broker security: 49 CFR 387.307, property broker surety bond or trust fund of $75,000. eCFR.
- Sales of invoices: UCC Article 9 applies to a sale of accounts. UCC 9-109, Cornell Law School.
- No market rates are used: the calculator works only with the offers you enter. Checked on 8 November 2026.
Spanish-speaking readers in Spain have a version under Spanish law: factoring con recurso y sin recurso.