DOCK 01RISK
Non recourse factoring vs recourse: who pays when a broker does not
DOCK 02SCENARIOS
Three scenarios: who takes the loss?
Pick what happens to an invoice. See who takes the loss under each kind of contract.
The broker is still in business but has not paid after 90 days.
RECOURSE
You absorb it
You, usually. Once the invoice passes the contract's buyback period, you repay the advance or it comes out of your next payments.
NON-RECOURSE
You absorb it
You, in many contracts. Slow payment is not insolvency. Some contracts treat a very long delay as a credit loss; check yours.
Check the buyback period and how the contract defines non-payment.
DOCK 03COMPARED
Recourse and non-recourse, side by side
| RECOURSE | NON-RECOURSE | |
|---|---|---|
| Who carries broker insolvency risk | You | The factor, within the contract's terms |
| Disputes over damage or shortage | You | Usually you |
| Typical cost | Lower fee | Higher fee for the added risk |
| Advance rate | Often higher | Can be lower |
| Broker approval | Matters less | Required for the protection to apply |
| Best fit | Carriers who check brokers and can absorb a rare loss | Carriers who want the credit risk off their books |
Non recourse freight factoring over a year: an EXAMPLE
Say you factor $20,000 a month. One factor quotes recourse at 2.5%; another quotes non-recourse at 3.25%. These rates are EXAMPLES inside the published range, not quotes.
| EXAMPLE YEAR | RECOURSE 2.5% | NON-RECOURSE 3.25% |
|---|---|---|
| Invoices factored in a year | $240,000 | $240,000 |
| Fees | $6,000 | $7,800 |
| One approved broker goes bankrupt owing $2,400 | You lose $2,400 | Factor absorbs it |
| Total cost of the year | $8,400 | $7,800 |
With one broker failure in the year, non-recourse comes out ahead. With none, recourse saves $1,800. That is the whole decision: how likely a broker failure is for you, and how badly one would hurt.
SOURCE:FreightWaves (updated Feb 26, 2026), OCT 2026
Recourse vs non-recourse factoring, trucking edition: decide in three questions
- Could you absorb one unpaid invoice of your largest load without missing a payment?
- Do you haul for many brokers, or does most of your volume go through a few?
- Will you use the factor's broker credit checks before every new broker?
If you can absorb the loss, spread your volume and check every broker, recourse is usually the better buy. If not, price non-recourse and read what it covers.
What is non recourse factoring in the fine print? Six things to check
- 01The definition of insolvency
- Bankruptcy filing only, or also a broker that stops paying and closes?
- 02Approved brokers
- Protection usually applies only to brokers the factor approved before you hauled.
- 03Credit limits
- Each broker may have a limit. Invoices above it can fall back to recourse.
- 04Time windows
- How long after the due date before the factor treats it as a credit loss.
- 05Exclusions
- Disputes, short pays, chargebacks for damage, and fraud are commonly excluded.
- 06Paperwork
- Missing or wrong documents can void protection on that invoice.
What is recourse factoring good for?
Recourse is the cheaper option, and for many carriers it is the sensible one. If you use the factor's credit checks, avoid brokers with poor payment records and keep clean paperwork, true broker insolvencies are rare. The money saved on every invoice can outweigh the occasional loss.
Non-recourse makes sense when one broker failure would seriously hurt you: a new carrier with no cushion, or a fleet with a lot of volume concentrated on a few brokers. Then the higher fee works like insurance on your receivables, with the limits above.
Some factors market non-recourse prominently; for example, OTR Solutions states true non-recourse factoring on its site. Whichever factor you choose, read the definition in the contract, and ask for an example of a claim it paid and one it refused.
SOURCE:OTR Solutions (own site), OCT 2026
Fewer bad brokers start with booking
A dispatcher who checks who you haul for cuts the risk before any factor sees the invoice.
DOCK 04FAQ
Recourse questions
Q-01What is non-recourse factoring?
A factoring agreement where the factoring company, not you, absorbs the loss if an approved broker cannot pay because of insolvency. It does not usually cover disputes, short pays or late payment, and it applies only within the factor's rules for approved brokers and credit limits. It costs more than recourse factoring.
Q-02Is non-recourse factoring worth the higher fee?
That depends on how much one broker failure would hurt you. If a single unpaid invoice would put you behind on payroll or the truck note, the higher fee can be worth it. If you check brokers carefully and could absorb a rare loss, recourse is usually cheaper over a year.
Q-03What does non-recourse not cover?
Usually it does not cover disputes over damage, shortages or service failures, short payments, invoices from brokers the factor did not approve, amounts over a broker's credit limit, fraud, or invoices with missing paperwork. Read the definition of a covered loss in the contract before you rely on it.
Q-04Which is better for new carriers?
New carriers often have the least cushion, which argues for non-recourse, but they also pay more per invoice when every dollar counts. A middle path is recourse factoring combined with strict use of the factor's broker credit checks, so you avoid risky brokers in the first place.
Get both options quoted
Ask RTS for its recourse terms and rate in writing, then decide with the scenarios above.
We refer carriers to RTS and may be paid for referrals. Rates and terms come from the factoring company, not from us.