If you’re weighing recourse vs non-recourse factoring, the question is who absorbs the loss when a customer never pays. With recourse, you do; with non-recourse, the factor covers only certain credit events, such as bankruptcy.
This explainer sits within the site’s wider coverage of invoice factoring, and it stays neutral and educational.
| Item | Typical value |
|---|---|
| Advance at funding | 80% to 95% of the invoice value |
| Recourse discount fee | Roughly 1% to 5% per invoice cycle |
| Non-recourse discount fee | Often 3% to 7% per invoice cycle |
| Reserve held back | 5% to 20% until the customer pays or the account is reconciled |
| Recourse buy-back window | Often 60 to 120 days |
These figures come from FreightWaves’ February 17, 2026 guide to recourse and non-recourse factoring. Terms vary by provider and country and can change, so check the source before you rely on them.
How both types start the same way
In either structure you sell an unpaid invoice to a factor and receive an advance, which FreightWaves’ February 17, 2026 guide puts at typically 80% to 95% of the invoice value. The factor then collects from your customer and sends you the balance, minus fees.
The same guide says a reserve of 5% to 20% is held back until the customer pays or the account is reconciled. For the step-by-step mechanics, see this explainer on how does invoice factoring work.
What differs is what happens when the customer does not pay. That single clause changes the price, the eligibility checks and your exposure.
What recourse factoring means
With recourse factoring, the credit risk stays with you. FreightWaves says that if the customer does not pay within a set timeframe, often 60 to 120 days, you must buy back the invoice or replace it with another eligible one (February 17, 2026 guide).
A freight software company’s blog post dated February 11, 2026 describes a similar recourse window, commonly 60-90 days, and says advances are often between 95% and 97%. Because that LoadConnect post also promotes a specific provider, treat its figures as one view rather than a benchmark.
According to FreightWaves, recourse arrangements tend to share these traits:
- Lower fees and easier approval, because you keep the credit risk.
- A buy-back obligation that can strain cash flow during a slow-pay cycle.
- Chargebacks that reduce reserves and future advances.
- Longer terms and possible monthly minimums.
The same guide adds that recourse agreements often include longer terms and may set monthly minimums.
What non-recourse factoring covers and excludes
Non-recourse factoring shifts certain non-payment events to the factor. In most agreements, the factor absorbs the loss if your customer becomes legally insolvent, such as through a bankruptcy filing, during the covered period, per FreightWaves.
The protection is narrower than the name suggests. Altery’s 16 June 2026 guide says it is typically narrow and usually applies only in defined circumstances such as formal insolvency, and that disputes, service issues and slow payment frequently fall outside cover (Altery).
FreightWaves’ separate non-recourse guide, also dated February 17, 2026, lists events that are frequently covered:
- Bankruptcy or formal insolvency of an approved customer after funding.
- A contract-defined credit default, such as cessation of business or receivership.
- In a few contracts, prolonged nonpayment that meets a credit-loss definition.
The same page says these items are typically not covered:
- Invoice disputes over damage, shortage, service failures or rate disagreements.
- Documentation errors, such as missing proof of delivery.
- Fraud or misrepresentation.
- Offsets and contract breaches.
- Invoices sold to customers who are not on the approved list or that exceed limits.
That page also notes that an invoice aging out for non-credit reasons is typically charged back or must be replaced, even under non-recourse agreements.
How the costs and trade-offs compare
Risk has a price. FreightWaves’ February 17, 2026 guide gives recourse discount fees of roughly 1% to 5% per invoice cycle and non-recourse fees of often 3% to 7% per invoice cycle. It says non-recourse advance rates commonly land between 80% and 90%.
The ranges vary even within one publisher. A second FreightWaves page from the same date puts non-recourse advances at often 90% to 97%, so compare quotes line by line.
Fee structures are covered in more detail in this guide to invoice factoring fees. FreightWaves also notes that many providers use tiered pricing that increases as invoices age.
| Feature | Recourse factoring | Non-recourse factoring |
|---|---|---|
| Non-payment risk | You are responsible for unpaid invoices | The factor covers specific credit events; you stay responsible for disputes and documentation |
| Fees | Generally lower | Higher |
| Eligibility | Easier, with broader customer acceptance | Stricter credit review and documentation standards |
| Contract flexibility | Longer terms and possible monthly minimums | More selective by customer or invoice, which can limit eligible volume |
This comparison is summarised from the at-a-glance table in FreightWaves’ February 17, 2026 guide, and terms vary by provider and country.
FreightWaves adds that non-recourse programs price for added risk transfer and tend to be stricter about which customers and invoices are eligible. Providers often approve coverage customer by customer and may cap exposure per account, so a customer you invoice regularly may not be covered at all.
In practice, this means a lower headline fee does not always mean a lower total cost. A single buy-back under recourse, or a single excluded dispute under non-recourse, can outweigh the difference in fees, so it helps to read how each contract treats those cases before comparing prices.
How do you choose between them?
There is no universally right answer, because it depends on your customers, margins and tolerance for risk. These questions can help frame the comparison:
- How reliable are your customers? FreightWaves lists recourse as best for companies with reliable customers and tight margins.
- Could one bankruptcy derail you? The same guide lists non-recourse as best for firms with thin reserves or higher-risk debtor portfolios.
- What does the contract really cover? LoadConnect warns that some companies market “non-recourse” programs that still allow chargebacks through contract loopholes, and says to read the fine print.
- Could you absorb a buy-back? Altery suggests keeping cash set aside rather than spending every advance the moment it arrives.
- Are there term commitments? Check for minimums and evergreen clauses before comparing prices.
FreightWaves also says many firms mix non-recourse with recourse to target the best risk-adjusted outcome. Most sources behind this page are written for freight and trucking, so terms in other industries and countries may differ.
Frequently asked questions
What is the main difference between recourse and non-recourse factoring?
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It is who takes the loss if a customer does not pay. With recourse you must buy back or replace the invoice, while non-recourse shifts specified credit losses, such as customer insolvency, to the factor.
Does non-recourse factoring mean I will always be paid?
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No. Altery’s 16 June 2026 guide says the protection is typically narrow, and disputes, service issues and slow payment frequently fall outside cover. Read which events your agreement covers and excludes.
Is non-recourse factoring always more expensive?
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FreightWaves’ February 17, 2026 guide says non-recourse fees are usually higher, often 3% to 7% per invoice cycle, against roughly 1% to 5% for recourse. Actual pricing varies by provider, so compare written quotes.
Can an invoice still be charged back under non-recourse?
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Yes, for non-credit reasons. FreightWaves says an invoice that ages out because of a dispute or missing documents is typically charged back or must be replaced, even under non-recourse agreements.
This page is for general information and education only and is not financial, investment, tax or legal advice.
