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Recourse vs. Non-Recourse Factoring: Which is Right for Your Trucking Business?

Trucking Factoring: Recourse vs. Non-Recourse
Maintaining a steady cash flow is paramount to success in trucking and logistics. Many trucking companies turn to factoring as a viable solution to meet the financial demands of day-to-day operations. Factoring allows companies to convert their outstanding invoices into immediate cash. However, not all factoring arrangements are the same. In this blog post, we’ll delve into the nuances of recourse and non-recourse factoring, helping you understand the key differences, benefits, and considerations to determine the right fit for your trucking business.

Understanding Recourse Factoring

Recourse factoring is a traditional form that has been used for many years. In this arrangement, the trucking company, known as the “client,” sells its invoices to a factoring company. Here’s how recourse factoring works:

  1. Invoice Submission: The client submits invoices to the factoring company for verification and funding.

  2. Advances: The factoring company advances a percentage of the invoice amount to the client, typically around 80-95%.

  3. Payment Collection: The factoring company is responsible for collecting payments from the client’s customers (the invoice debtors).

  4. Recourse Clause: In recourse factoring, there is a crucial clause known as the “recourse clause.” This clause specifies that if the client’s customer fails to pay the invoice, the client is ultimately responsible for repurchasing the unpaid invoice or replacing it with another invoice of equal value.

  5. Risk and Responsibility: With recourse factoring, the client bears the risk of non-payment. If the client’s customer becomes insolvent or defaults on the invoice, the client must repay the factoring company for the advanced funds.

Benefits of Recourse Factoring

Recourse factoring offers several advantages for trucking companies:
1. Lower Costs: Recourse factoring typically comes with lower fees and discount rates because the client retains some responsibility for unpaid invoices.
2. Flexibility: Clients have more control over which invoices they choose to factor, allowing them to manage their cash flow strategically.
3. Credit Access: Trucking companies with lower creditworthiness or startups may find recourse factoring more accessible since the factoring company considers the client’s customers’ creditworthiness.

Understanding Non-Recourse Factoring

Non-recourse factoring is a variation of factoring that shifts a significant portion of the risk from the client to the factoring company. Here’s how non-recourse factoring works:

  1. Invoice Submission: The client submits invoices to the factoring company for verification and funding, similar to recourse factoring.

  1. Advances: The factoring company advances a percentage of the invoice amount to the client, typically between 80% and 95%.

  1. Payment Collection: The factoring company is responsible for collecting payments from the client’s customers.

  1. Non-Recourse Clause: There is a crucial difference in non-recourse factoring – the absence of a recourse clause. If the client’s customer defaults or becomes insolvent, the factoring company absorbs the loss, and the client is not liable for repurchasing the unpaid invoice.

  1. Risk Transfer: Non-recourse factoring is often seen as a way to transfer the risk of non-payment to the factoring company, providing a higher level of protection for the client.

Benefits of Non-Recourse Factoring

Non-recourse factoring comes with its own set of advantages:

  1. Lower Risk: Clients benefit from reduced risk exposure. The factoring company assumes the loss if an invoice goes unpaid due to a customer’s insolvency or default.

  2. Peace of Mind: Non-recourse factoring provides clients peace of mind, knowing they won’t be held responsible for customer payment failures.

  3. Credit Protection: Clients can protect their credit and keep great relationships with their consumers because the factoring firm absorbs losses due to missed invoices.

Choosing the Right Option for Your Trucking Business

Now that we’ve explored the differences between recourse and non-recourse factoring, how do you determine which option best suits your trucking business? Consider the following factors:

  1. Risk Tolerance: Evaluate your risk tolerance. If you’re comfortable taking on some responsibility for non-payment and want lower factoring costs, recourse factoring might be the way to go. However, non-recourse factoring offers greater security if you want to minimize risk and protect your business from customer defaults.

  2. Customer Creditworthiness: Assess your customers’ creditworthiness. If your customers have a strong track record of timely payments, you may feel more confident with recourse factoring. For clients with customers of varying creditworthiness, non-recourse factoring provides added protection.

  3. Cost Considerations: Compare the cost structures of both recourse and non-recourse factoring. While non-recourse factoring offers increased risk protection, it often comes with higher fees and discount rates. Analyze the impact on your bottom line.

  4. Long-Term vs. Short-Term Needs: Consider the duration of your factoring needs. For short-term, one-off financing needs, recourse factoring can offer flexibility. However, non-recourse factoring may be more suitable if you’re looking for a long-term financing solution with lower risk.

  5. Client Relationships: Think about maintaining positive customer relationships. If retaining a solid rapport with your clients is a priority, non-recourse factoring can protect these relationships by absorbing losses caused by non-payment.


Recourse and non-recourse factoring are valuable financial tools that can help trucking companies maintain cash flow and support growth. The choice between them ultimately depends on your circumstances, risk tolerance, and long-term goals.

The secret to a fruitful partnership, regardless of whether you choose recourse or non-recourse factoring, is choosing a trustworthy factoring business that comprehends your industry and provides clear terms and prices. Your trucking company’s factoring needs and goals should be carefully considered to direct you toward the best option and ensure a more stable financial future.

Small and large companies rely on Factor My Load to provide trustworthy local services to meet their ongoing cash flow requirements. Wherever you are, we have a presence of our invoice factoring business with qualified staff ready to assist you.