GET PAID FAST / THE FINE PRINT
Non recourse factoring covers less than the name says
MONTHLY INVOICES
We refer carriers to a factoring partner and may be paid for referrals.
SIDE BY SIDE
Factoring with recourse and without recourse
The same invoice, two kinds of contract. What each one usually means for non recourse freight factoring in practice. Terms vary, so check your own.
| Recourse | Non-recourse | |
|---|---|---|
| Broker goes bankrupt | You buy the invoice back | Factor takes the loss, if the broker was approved |
| Broker pays very late | Charged back after the recourse period | Often charged back too, unless insolvency is proven |
| Detention or lumper disputed | You | You |
| Damage or shortage claim | You | You |
| Missing or wrong paperwork | You | You |
| Fee | Usually lower | Usually higher |
| Broker approval | Advised | Required before you haul for coverage |
Five of seven rows come out the same. The rows that differ are about one event: a broker that can't pay at all. Everything that starts as an argument over the load, the paperwork or the extras stays your problem under either contract, so read every row before you pay for the protection. Non-recourse is real protection against one specific risk, a broker going under, and you pay extra for it. How much extra is worth checking on factoring rates.
BROKER FAILURE TIMELINE
What happens when a broker stops paying
EXAMPLE contract and timing. Choose recourse or non-recourse, then why the broker didn't pay, and follow the invoice day by day.
- DAY 0
Load delivered, paperwork clean. The factor advances 90% of the invoice.
- DAY 30
Broker's terms come due. No payment arrives.
- DAY 45
The factor calls and writes. The broker has stopped paying carriers and files for bankruptcy.
- DAY 90
Insolvency is a covered reason in this EXAMPLE contract, and the broker was approved by the factor before you hauled.
- OUTCOME
The factor absorbs the loss. You keep the advance; the reserve may be lost depending on the terms.
Covered: the factor carries the loss.
Try the dispute with both kinds of contract. The ending is the same, because non-recourse factoring covers who can't pay, not who won't.
READING THE CONTRACT
What is recourse factoring, in the contract?
The recourse clause is often a single paragraph, and it decides who loses money when a broker doesn't pay. In recourse factoring for trucking, it says how long the factor waits before charging an unpaid invoice back to you, and how it collects: usually by deducting from your next advances or your reserve.
In a non-recourse contract, look for the list of covered reasons. If the list says "insolvency" or "bankruptcy" only, then slow payment, disputes and claims are all excluded. Also check whether coverage needs the broker approved by the factor before pickup, and whether there is a cap per broker.
General information, not legal advice. Have anything you don't understand explained before you sign.
FIND THESE IN THE CLAUSE
- Covered reasons for non-payment, in writing
- Days before an unpaid invoice is charged back
- How charge-backs are collected
- Broker approval needed before pickup?
- Any limit per broker or per invoice
- What happens to the reserve on a covered loss
WHAT IT DOES NOT COVER
Non-recourse freight factoring stops here
These are the non-payments carriers actually run into most, and nearly all of them land on you, whatever your contract is called.
Detention and accessorials
Broker says it never approved the detention or the lumper. Without written approval, that line is yours.
Damage and shortage
Receiver notes damage or missing pieces; the broker deducts the claim from the invoice.
Paperwork errors
Unsigned BOL, wrong load number, missing pages. The factor can refuse or charge back.
Unapproved brokers
Hauled for a broker the factor didn't approve first? Most non-recourse protection won't apply.
CHEAPER THAN ANY CONTRACT
The protection that covers disputes
Since no factoring contract covers disputes, the paperwork has to. Get detention approved in writing when it starts, note damage on the BOL before you sign it, photograph seals and freight, and check every broker with your factor before you book. That covers more of your real risk than nonrecourse factoring alone ever will.
This is also where dispatch helps. Our dispatchers ask brokers for detention terms on the rate con, request approval in writing when the clock starts, and keep the record with the load. Every rate con comes to you to sign or turn down.
PRICE OF PROTECTION
What is non recourse factoring worth to you?
EXAMPLE numbers, not quotes: a carrier factoring $40,000 a month, offered recourse at 2.5% and non-recourse at 3.5%.
EXTRA PER MONTH
$400
EXTRA PER YEAR
$4,800
BREAK-EVEN
2 invoices
In this example, non-recourse pays off if roughly two $2,400 invoices a year are lost to a broker going under. If your brokers are established and you check every one, that is unlikely; if you haul for many new brokers, it might not be. Recourse factoring for trucking is usually the cheaper bet for carriers with steady, known brokers. Run your own numbers with real quotes.
NON RECOURSE INVOICE FACTORING FITS
- New carriers hauling for brokers they don't know yet
- Carriers with a few large brokers making up most of their revenue
- Owners who would rather pay more than risk a large charge-back
RECOURSE FITS
- Carriers with long-standing, reliable brokers
- Owners who check every broker and keep a reserve
- Anyone for whom the lower fee adds up to more than the risk
QUESTIONS
Recourse vs non-recourse, answered
We refer carriers to a factoring partner and may be paid for referrals. Back to all factoring guides.
01What is non-recourse factoring?
Factoring where the factor takes the loss if an approved broker can't pay because of a credit failure, usually insolvency or bankruptcy. You keep the advance. It doesn't usually cover disputes, claims or paperwork problems, and the protection often applies only to brokers the factor approved before you hauled.
02How do I read the recourse clause?
Find three things: the exact reasons for non-payment the factor covers, how many days pass before an unpaid invoice is charged back to you, and how a charge-back is collected, often from your next advances. If the covered reasons aren't listed plainly, ask for them in writing. This is general information, not legal advice.
03Who pays if the broker disputes the load?
Usually you, under both recourse and non-recourse terms. A dispute over detention, a damage claim, a shortage or missing paperwork isn't a credit failure, so the factor can charge the disputed amount back to you. You then settle it with the broker directly. Good paperwork is the best protection.
04Which is better for new carriers?
It depends on your brokers and the price difference. Non-recourse protects a new carrier from a broker going under, which matters when every broker is new to you. But it usually costs more, and a factor's broker credit checks already filter out many weak payers. Compare both quotes on the same invoices.
BOTH QUOTES, SIDE BY SIDE
Know what you're covered for
our factoring partner quotes your volume. Ask for recourse and non-recourse pricing and compare. We refer carriers to a factoring partner and may be paid for referrals.