What are Recourse and Non Recourse Factoring?

One important question that a trucker/owner-operator must ask is what happens when a client/shipper does not pay your invoice.

In such a scenario you will either be affected or would be immune by the kind of factoring you have taken i.e. Recourse and Non Recourse factoring.

Truck factoring is the process by which a trucking company sells its trucking invoices for an advance payment to a factoring company. Usually, a trucking company has to wait 30/45/60/90 days to get paid from a broker/client. That creates a cash flow problem, cash is king in a trucking business. Because without cash you won’t be able to pay for fuel, maintenance, trucker supplies, trucker salary, etc.

A factoring company helps truckers/owner-operators to focus on driving by giving back-office support by managing your bill collections on any invoices you’ve submitted for factoring.

There are two main types of factoring – recourse, and non-recourse.

1. Recourse Factoring:

Recourse factoring means the shipper/customer is unable to pay for the invoice/bill raised then you have to buy back your bill/invoice from the factoring company. In this situation, your company is responsible for the invoices.

Recourse factoring rates are lower than nonrecourse because the owner operator/ trucker is taking the risk of nonpayment of invoices/bills from shipper/customer.

How to choose a factoring company?

Recourse factoring is a good option for truckers who:

  • Has low risk, creditworthy clients
  • Want to avoid extra fees which comes with nonrecourse
  • Want to sell invoices at the lowest fees/discount
  • Wants to get maximum cash for the sale of invoices
  • Can pay back or exchange other invoices if your client defaults

There are a lot of advantages of recourse factoring, which are:

  • Recourse is less costly than non-recourse factoring
  • The approval process is pretty fast
  • More cash while converting bills/invoices
  • Robust factor credit checks and payment history verification reduces default risk.

Some noteworthy disadvantages of recourse factoring:

  • Factoring companies have the right of recourse if your client/shipper defaults.
  • As you have provided your business income or bank account. Your credit history will be affected if you are not able to pay back the default or offer an invoice of equal or greater value as an exchange.
  • Less stringent credit checks compared to Non-recourse because the factor is assuming less risk

Recourse factoring because of its many advantages is popular as an invoice discounting method. If you put and choose smartly which client bill to do recourse, you would be out of trouble.


2. Non-recourse Factoring:

In non-recourse factoring, the factoring company will assume the risk of non-payment of the invoice by your customer/shipper. Non-recourse comes with a lot of norms and conditions, non-recourse factoring does protect you from all types of non-repayment of invoices.

Advantages of Non-recourse factoring:

  • Improves your cash flow
  • Protects you from a certain type of invoice nonpayments
  • Price is similar to the cost of regular factoring
  • Allows you to provide payment terms to clients
  • Relatively easy to get
  • Can be used as short-term funding

Disadvantages of Non-Recourse Factoring

  • The level of bill default protection varies by company
  • The factor will be very careful before funding your account
  • Factoring costs more than bank financing

Because non-recourse is only available for shippers/customers who have a very good repayment/credit history. Non-recourse is not available for high-risk or low-rated debtors/customers/shippers.

Non-recourse factoring is available if a customer/shipper declares bankruptcy or there is some urgency like that.

You should sit down with a factoring company to discuss the terms and conditions of your factoring agreement. You should tie up/work with a factor that offers both recourse and nonrecourse factoring. If you are working with a factor with good credit checks, you can avoid hauling loads for a client/shipper with below par credit history.

Whatever be the plan recourse or nonrecourse, a good factor will make a diligent effort to collect the pending invoices. Call for collection factor to debtor starts from 40 days after the bill was sent. Upon reaching 90 days the factor may recourse the invoice back to you.

A factor should provide maximum options to you to cover the cost. The Factor can withhold a portion of the future cash advances or reduce cash from an account reserve. Figuring out what to do with the unpaid invoices shouldn’t give you nightmares, because such a scenario is both bad for you and your factor

See the best factoring companies in the USA.

What should you consider between Recourse and Non Recourse Factoring?

If as an owner-operator it actually depends on the clients or shippers you are working with. If you have good quality clients go for recourse factoring.

If your client has a chance of default or his/her credit record is patchy then go for non-recourse factoring.

Recourse factoring is cheaper than nonrecourse factoring because in non-recourse factoring the factoring company is taking the risk of nonpayment of invoices.

Get our risk free and totally free factoring consultation:

If you are looking for a factoring company, MaxTruckers can help you with a FREE factoring consultation. With MaxTruckers you get factoring rates as low as 1% OR if you are looking for a weekly fuel line of credit, that too can be catered with a credit line of $2800 per week. Plus you get a trucking business start-up kit as a bonus which is worth more than $500.

Since MaxTruckers is a consulting company, the factoring consultations are impartial and fair. All the factoring companies that will be referred to you are pre-verified and 100% trustworthy companies. Above all, we are rated 5 stars by our clients on Trustpilot for our factoring service. So it is advisable to get a FREE factoring consultation with us.

Get our zero risk & free services:
100% free factoring consultation, comprehensive insurance consultation, effective dispatch service & high saving fuel card.


If you are looking for a factoring, dispatch, insurance or fuel card. We have good news for you,
MaxTruckers can help you with a FREE factoring consultation. With MaxTruckers you get factoring rates as low as 1%
(or)
If you are looking for a weekly fuel line of credit, that too can be catered with a credit line of $2800 per week.
Plus you get a trucking business start-up kit as a bonus which is worth more than $500.
Since MaxTruckers is a consulting company, the factoring consultations are impartial and fair. All the factoring companies that will be referred to you are pre-verified and 100% trustworthy companies.


You get to use the service of the best factoring company for trucking business if you select a factoring company through our consultation.


We also provide you with a TCS fuel card, which gives you savings of 35cents to 45 cents per gallon per truck per transaction (fuel fill) or $7000 per truck per year.


We also provide you with a top-end, responsive, adaptive, and affordable dispatch service for new and experienced owner operators/truckers who are looking for quality, well paid and apt loads to haul.


And other than fuel card, factoring and dispatch we also provide you a detailed insurance consultation with the aim of providing you comprehensive coverage.


We cover different aspects of insurance like 3rd party liability, medical. trailer/ equipment coverage, cargo, driver coverage, etc.


Above all, we are rated 5 stars by our clients on Trustpilot for our factoring service. So it is advisable to get a FREE factoring consultation with us.