Key facts
| Recourse | You buy back invoices the broker doesn't pay, on the terms in your agreement |
|---|---|
| Non-recourse | The factor absorbs the loss only for the reasons your agreement lists |
| What's usually excluded | Disputes about the load, missing or wrong paperwork, and short payments |
| Recourse period | Set by your agreement: the number of days before a buy-back can be charged |
| How a buy-back is collected | Usually taken from your reserve or later fundings, or billed to you |
| Where the rules come from | Your factoring agreement; sales of invoices fall under UCC Article 9 |
Who pays when the broker doesn't
In both types, the factor buys your invoice and the broker is told to pay the factor. The difference is what happens if the money never comes.
With recourse, the risk stays with you. Once the recourse period in your agreement passes, the factor can charge the invoice back: it takes back the advance and fees, usually from your reserve or your next fundings.
With non-recourse, the factor takes the loss, but only for the reasons the agreement covers. Many agreements limit this to a broker's financial inability to pay, such as bankruptcy or going out of business, and only for brokers the factor approved before you hauled.
What non-recourse often doesn't cover
Non-recourse protects against credit risk, not against problems with the load or the paperwork. Read the definition in your agreement and look for exclusions like these:
- A dispute about the load: damage, shortage, late delivery or a rate disagreement
- Missing, unsigned or mismatched documents
- A broker that wasn't approved, or was over its credit limit, when you hauled
- Short payments, such as a lumper or detention charge the broker didn't approve
- A broker that paid you, or someone else, instead of the factor
- Fraud, or an invoice that was already sold to someone else
Cost and other trade-offs
Because the factor takes on more risk, non-recourse pricing is often higher, but that isn't always true, so compare actual offers rather than labels. A recourse agreement with a low fee can cost more in a year when a broker fails; a non-recourse agreement with narrow coverage may rarely pay out.
Ask how many days the recourse period is, whether non-recourse coverage depends on the factor's credit approval, and whether a chargeback carries its own fee.
Worked example: a buy-back
Example numbers only. A $2,000 invoice, 90% advance, 3% flat fee taken from the reserve, and a recourse period of 90 days in this example agreement. The broker never pays.
| When funded | You receive the $1,800 advance; $200 is held as the reserve |
|---|---|
| Day 90, still unpaid | The recourse period ends and the invoice can be charged back |
| What the factor recovers | The $1,800 advance plus the $60 fee, often first from the $200 reserve |
| What you owe after the reserve | $1,660, often taken from your next fundings |
| Under non-recourse | If the broker went out of business and the agreement covers that, no buy-back; if the broker disputes the load, a buy-back can still apply |
Your agreement may calculate a buy-back differently, for example with extra fees for the days the invoice was open.
How to choose between them
Get the exact definitions
Ask for the recourse and non-recourse sections in writing: what counts as a covered loss, the recourse period, and how a buy-back is calculated.
List the exclusions
Write down every situation the agreement excludes. That's the real coverage.
Price both offers
Run each offer through the factoring cost calculator, then add what one charged-back invoice would cost you under the recourse offer.
Check approval rules
Find out whether coverage depends on the factor approving the broker before you haul, and how you check that on each load.
Keep the paperwork clean
Most chargebacks under either type start with a dispute or a document problem, so a complete, matching packet protects you either way.
Checklist
- Recourse period (number of days) found in the agreement
- Definition of a covered loss for non-recourse
- List of exclusions written down
- How a buy-back is calculated, including any extra fees
- Whether coverage needs the broker approved before the load
- Both offers priced in the calculator
FAQ
Does non-recourse factoring guarantee I get paid?
No. It covers only the losses your agreement lists, often just a broker's inability to pay. Disputes, paperwork problems and short payments are commonly excluded, so an invoice can still be charged back.
What is a factoring chargeback?
It's when the factor takes back money it advanced on an invoice, plus fees, because the invoice wasn't paid or was disputed. It's usually taken from your reserve or later fundings, as your agreement allows.
Is recourse factoring a bad deal?
Not necessarily. Recourse can cost less, and if you haul for brokers that pay reliably the risk may be small. Compare the fee savings with what a charged-back invoice would cost you.
Can a factor charge back a non-recourse invoice?
Yes, when the reason the broker didn't pay is excluded from coverage, such as a dispute about the load or missing paperwork. Check the exclusions in your agreement.
Sources
Related tools and guides
- Factoring Help Center: how factoring works
- Factoring payment problem solver
- Factoring cost calculator
- Factoring contract checklist
- Invoice document checklist
- Cancel or switch your factoring company
- Factoring vs quick pay
- What to do when a broker doesn't pay
- Check a broker's FMCSA authority, free
- Cost per mile calculator
- Factoring companies in the THC directory
General information, not legal, tax or financial advice. Factoring agreements differ, and each state adopts the UCC with its own changes. Check your own agreement, and talk to a qualified attorney or accountant about your situation. Factoring companies can appear in the Trucking Help Center directory, including through paid partner listings. A listing is not an endorsement, and these guides and tools don't rank or favor any provider.