Recourse Factoring
What is recourse factoring? Recourse factoring is a factoring contract where the carrier is required to buy back any invoice the broker fails to pay, leaving credit risk with the carrier.
Full definition
In a recourse factoring agreement, the factor advances cash against the invoice but retains the right to charge back the advance (plus fees) if the debtor — usually the broker or shipper — doesn't pay inside a set window, typically 60 to 90 days. The carrier remains the ultimate guarantor.
Because the factor's credit exposure is lower, recourse rates run materially cheaper than non-recourse — usually 1.5% to 3% per invoice depending on volume. Most owner-operators running well-known, vetted brokers choose recourse because the cost savings outweigh the rare chargeback event.
The chargeback mechanism varies: some factors net the bad invoice against future advances; others demand direct repayment. Read the contract — recourse only covers credit default, not invoice disputes, billing errors, or shortage claims, which are the carrier's responsibility under any contract type.
If you haul for marginal or unfamiliar brokers, the savings on recourse may not be worth the chargeback exposure. Non-recourse with a curated approved-broker list is the alternative.
Example
- A broker on a $4,000 invoice files bankruptcy 75 days after the load. Under recourse, the factor charges back the original advance against the carrier's next funding.