ENTRY 01 / RECOURSE VS NON-RECOURSE

Non recourse factoring vs recourse: who pays when a broker doesn't

By Daniel. Updated October 2026.

ENTRY 02 / COMPARISON TABLE

Recourse vs non-recourse factoring, side by side

TERM	RECOURSE	NON-RECOURSE
Broker never pays (insolvent)	You buy the invoice back	Factor absorbs it, if the broker was approved
Broker pays very late	Charged back after the recourse period	Usually the same as recourse
Broker disputes the load	Charged back to you	Charged back to you
Rate	Lower	Higher, sometimes by about a full point
Which brokers	Any the factor approves	Often only brokers with strong credit
Best for	Owners who haul for well-rated brokers and keep a small reserve	Owners for whom one unpaid load would be a crisis

For a one-truck business, the question is simple: if one $2,500 invoice were never paid, would you still make next week's truck payment? If yes, recourse and the lower rate may be fine. If no, the extra cost of non-recourse buys real protection, as long as you understand its limits. The cost side is on freight factoring rates and fees.

SOURCE: DAT, RECOURSE VS. NON-RECOURSE FACTORING, OCT 2026

ENTRY 03 / RECOURSE PERIOD TIMELINE

One unpaid invoice, from funding to the end of the recourse period

Pick the contract, what goes wrong and how long the recourse period runs. The timeline shows when each event happens, and the line below it shows who ends up carrying the loss.

INVOICE $2,500 · ADVANCE $2,250 · EXAMPLE

WHO CARRIES THE LOSS: THE FACTOR

The broker filed for bankruptcy on day 50, inside the covered window. If the broker was on the factor's approved list and the invoice was clean, the factor absorbs the loss and you keep the $2,250 advance. The reserve on that invoice is usually not paid.

These are typical contract terms, simplified. Your contract decides the period, what triggers a charge-back and what happens if a broker pays after one. Read those clauses, and ask for anything unclear in writing. Also ask whether a charged-back invoice can be factored again once the broker pays, and whether any extra fee applies while it sits unpaid, since both change what a late broker really costs you.

ENTRY 04 / WHAT IT DOES NOT COVER

The fine print on non-recourse freight factoring

Non-recourse protects you against one thing: a broker's inability to pay. Almost every other reason an invoice goes unpaid is still yours. DAT names disputed invoices and invoices sent directly to customers as common exclusions.

That is why non-recourse is not a replacement for clean paperwork and careful broker choice. It is protection against a rare, serious event, priced accordingly.

Disputes. The broker says the rate, the delivery or the paperwork is wrong.
Cargo claims. Damage, shortage or contamination claims taken off the invoice.
Paperwork errors. Missing signatures, wrong amounts, unreadable documents.
Invoices you sent yourself. Anything not submitted through the factor.
Unapproved brokers. Loads for brokers the factor didn't approve, or above its credit limit.
Slow payment. A broker that pays late but does pay isn't insolvent.

What non-recourse costs a one-truck business in a year

An EXAMPLE owner factors $24,000 a month. If non-recourse costs one point more than recourse, which is the gap one factor's own guide mentions, that is $240 a month, or $2,880 a year. In return, the owner is covered if an approved broker goes bankrupt inside the contract's window.

So the protection pays for itself only if an insolvency would cost you more than about $2,880 in a year. For an owner who hauls for a handful of well-rated brokers, that may never happen. For an owner who books with many new brokers, or who could not survive one lost load, it is real insurance-like value, even though it isn't insurance.

ENTRY 05 / CHECKING BROKER CREDIT YOURSELF

The cheapest protection is not booking the bad broker

Your factor's credit check

Look the broker up before you sign the rate con. If the factor won't buy the invoice, treat that as the answer.

FMCSA authority status

On FMCSA's Licensing and Insurance site, confirm the broker's authority is active and its bond or trust fund is on file. Brokers must keep $75,000 of financial security under 49 CFR 387.307.

Load board credit scores

DAT and Truckstop show credit scores and days-to-pay for brokers to their subscribers. A falling score is a warning.

Signals in the conversation

Pressure to haul today at a rate well above the market, a new company name, or vague answers about payment terms all deserve a second look.

SOURCE: ECFR, 49 CFR 387.307 (BROKER FINANCIAL SECURITY), OCT 2026

If a broker goes under owing you money

Tell your factor the same day and send it everything you have on the load: rate con, BOL, invoice and any messages. Under non-recourse, the factor handles the claim if the invoice qualifies. Under recourse, or for a load you didn't factor, you can file a claim against the broker's bond or trust fund. Find the surety or trust company on the broker's FMCSA record, ask for its claim process, and file promptly: the $75,000 of security has to cover every unpaid carrier's claims together, and it can run out. Keep copies of everything you send, and note the date and name of everyone you speak to.

ENTRY 06 / HOW FACTORS DEFINE INSOLVENCY

What "insolvency" means in a factoring contract

Published guides from factors themselves are narrower than the marketing. our factoring partner's guide (our referral partner), for example, describes non-recourse that applies only if the broker declares bankruptcy, often within a set time after the invoice, and says factors limit it to brokers with good credit. The same guide notes that after 90 days a factor may recourse an invoice back to the carrier. DAT says non-recourse usually costs more because the factor takes on more risk.

In practice, look for three things in the contract: the events that count as insolvency (a bankruptcy filing, a court judgment, a formal closure), the time window in which they must happen, and the brokers it applies to. If the definition is "bankruptcy filed within 90 days of purchase", a broker that simply stops answering the phone is not covered.

This is general information, not legal advice. For the bigger picture on how factoring works and what to watch in a contract, see our freight factoring page, or get a factoring quote that states both options.

SOURCE: OUR FACTORING PARTNER, THE DIFFERENCE BETWEEN RECOURSE AND NON-RECOURSE FACTORING, OCT 2026

Factoring questions

Q01What is recourse factoring?

Recourse factoring means you agree to buy back any invoice the factor can't collect, usually after a set period such as 90 days. The factor advances you cash as normal, but if the broker never pays, the advance is charged back to you, often from your next advances. Rates are usually lower because you keep the credit risk.

Q02Which is better for new carriers?

It depends on your brokers and your cash. Recourse is usually cheaper, and if you only haul for brokers the factor approves, losses are rare. Non-recourse costs more but protects you if an approved broker goes under, which matters when one unpaid load could empty your account. Compare the yearly cost of each.

Q03What is non-recourse factoring?

Non-recourse factoring means the factor takes the loss if an approved broker can't pay because of insolvency, typically bankruptcy, within the terms of your contract. You keep the advance. It does not usually cover slow payment, disputes, cargo claims or paperwork problems, and it often applies only to brokers with good credit.

Q04What does non-recourse not cover?

Usually: invoices the broker disputes, cargo damage or shortage claims, late delivery penalties, invoices with paperwork errors, invoices you sent to the broker yourself, brokers the factor didn't approve, and simple slow payment. Read your contract's definition of insolvency and its list of exclusions before you rely on it.

We refer carriers to our factoring partner and may be paid for referrals. It never changes your rate. Disclosure.

By Daniel

UPDATED OCTOBER 2026