What is the difference between recourse and non-recourse factoring?

Last updated May 2026 · Reviewed by David Chen
Quick Answer

In recourse factoring, you remain liable if your customer doesnt pay — you must buy back the invoice or replace it. In non-recourse factoring, the factor absorbs the bad debt risk for credit-related non-payment. Non-recourse costs more (1-2% extra) but protects you from customer bankruptcy and credit losses.

Key Details

  • Recourse: you liable for non-payment
  • Non-recourse: factor absorbs credit risk
  • Non-recourse costs 1-2% more
  • Non-recourse: covers credit issues only, not disputes
  • Recourse: cheaper, you keep risk
  • Most factoring is recourse by default
Answer by David Chen — Senior Business Funding Editor
12+ years in alternative lending. $200M+ underwritten.

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