Recourse vs Non-Recourse Factoring: Protect Your Trucking Cashflow

Getting paid for the loads you haul should be predictable — not a roll of the dice. Yet many trucking companies don’t realize how much financial risk they’re accepting until an invoice goes unpaid. One of the biggest factors determining who absorbs that loss is whether you use recourse or non-recourse freight factoring.

At a high level, recourse factoring offers lower fees but places the risk of nonpayment on the carrier. Non-recourse factoring costs slightly more but shields your business if a broker becomes insolvent or shuts down. Understanding this difference is critical when choosing a factoring partner — especially in a volatile freight market.

This guide explains how each option works, what it means for your operation, and why OTR Solutions’ True Non-Recourse Factoring provides a higher level of protection than many other programs labeled “non-recourse.”

Key Takeaways

Recourse factoring typically costs less, but carriers are responsible for unpaid invoices
Non-recourse factoring offers non-payment protection from broker bankruptcy and credit failure
Not all “non-recourse” programs eliminate chargebacks — contract details matter
OTR Solutions offers both recourse and True Non-Recourse options so carriers can choose what fits best

Understanding Recourse Factoring

Recourse factoring allows trucking companies to turn invoices into fast cash while keeping the financial risk tied to customer payment. If a broker or shipper fails to pay, the carrier remains responsible for that invoice.

How Recourse Factoring Works

After delivering a load, you submit your invoice to a recourse factoring company. The factor advances most of the invoice value — often between 95% and 97% — and then collects payment directly from the broker or shipper.

If payment doesn’t arrive within the agreed recourse window (commonly 60–90 days), you must either:

Repurchase the unpaid invoice, or
Replace it with another invoice of equal value

Pros and Cons of Recourse Factoring

Benefits

Lower factoring fees
Slightly higher advance rates
Easier approval since the factor assumes less risk

Risks

You carry full responsibility if a customer doesn’t pay
Chargebacks can create sudden cashflow gaps
One bad invoice can erase the profit from multiple loads

What Is Non-Recourse Factoring?

Non-recourse factoring shifts the risk of customer nonpayment from the carrier to the factoring company — but only for credit-related failures, such as bankruptcy or insolvency.

How Non-Recourse Factoring Works

Once you haul a load for an approved broker or shipper, you submit the invoice and receive an advance, often within 24–48 hours. The factoring company manages collections.

If the customer later becomes insolvent or goes out of business, the factoring company absorbs the loss. You keep the funds you were advanced, helping maintain consistent cashflow.

Benefits and Trade-Offs

Advantages

Protection from bad debt caused by broker failure
More predictable revenue
Reduced stress around collections

Considerations

Slightly higher factoring rates
Brokers and shippers must meet credit approval standards

Important: Some companies market “non-recourse” programs that still allow chargebacks through contract loopholes. Always read the fine print.

Choosing Between Recourse and Non-Recourse Factoring

The right choice depends on your operation and tolerance for risk.

How much risk can you absorb?

If buying back an invoice would disrupt payroll, fuel purchases, or maintenance, non-recourse protection may be worth the added cost.

Who do you haul for?

Even established brokers can face financial trouble. Strong credit histories help — but they don’t eliminate risk.

What does your budget allow for?

Lower fees lose their appeal quickly if one unpaid invoice wipes out weeks of earnings.

How lean is your operation?

Smaller fleets and owner-operators typically benefit more from the stability non-recourse factoring provides.

What Makes True Non-Recourse Factoring Different?

True Non-Recourse Factoring delivers exactly what the name promises: once you’re paid, the money is yours to keep if the customer fails due to credit insolvency.

Some factoring companies advertise non-recourse coverage while inserting exceptions that allow chargebacks for technicalities or vague exclusions. OTR Solutions takes a more straightforward approach.

If OTR approves the broker and that broker becomes insolvent, OTR absorbs the loss — not the carrier. No chargebacks. No fine print.

Why Partner with OTR Solutions?

OTR Solutions combines True Non-Recourse protection with tools designed to support your entire operation.

No Chargebacks for Credit Failure – predictable cashflow without surprises
Thorough Broker Credit Vetting – know who you’re hauling for before you accept the load
Dedicated Account Support – a team that helps manage invoices and cashflow
Integrated Technology – mobile invoice submission, real-time payment tracking, and fuel savings through the OTR Fuel Card

Make an Informed Choice for Your Business

While recourse factoring may appear cheaper on paper, the financial exposure can be costly. A single unpaid load can undo weeks of hard work. True Non-Recourse Factoring provides stability, protection, and peace of mind — allowing carriers to focus on growth instead of risk.

Apply for True Non-Recourse Factoring with OTR Solutions

Frequently Asked Questions

Is non-recourse factoring worth the higher fee?

For many small fleets and owner-operators, yes. The added protection often outweighs the modest cost difference.

Can I still be charged under a non-recourse plan?

Only for issues unrelated to credit, such as disputes or missing paperwork. Always confirm contract terms.

How do I know if a program is truly non-recourse?

Ask whether chargebacks are ever allowed after payment. If the answer is yes, it’s not truly non-recourse.

Does OTR Solutions offer both options?

Yes. OTR provides both recourse and True Non-Recourse programs so carriers can choose what best fits their operation.