Glossary · Factoring & Cash Flow
Recourse Factoring.
Factoring arrangement where the carrier remains liable for unpaid invoices if the broker fails to pay; lower rates than non-recourse.
What it is
Recourse factoring is the default factoring structure for most owner-operators. The factor advances cash on invoices submitted by the carrier (typically 90–97% of the invoice face value) but retains the right to charge back the carrier if the broker doesn't pay within an agreed window — usually 60 to 90 days.
The factor still underwrites broker credit at intake and refuses to advance against high-risk brokers. But the factor bears no credit-risk reserve on the deals it does advance — the carrier remains the ultimate obligor if the broker becomes insolvent or simply stops paying. Recourse rates typically run 1.5–4%, materially cheaper than non-recourse equivalents.
Why it matters for trucking finance
Recourse factoring is cheaper but transfers broker insolvency risk back to the carrier. A carrier with concentrated broker mix — where one or two brokers represent more than 40% of revenue — faces real risk exposure on a recourse contract. A single broker failure on $80K of outstanding receivables can wipe out months of margin and force the carrier into emergency working capital at materially worse rates than the factor spread.
For diversified broker mix and clean payment history, recourse is the lower-cost choice. The math favors recourse when broker concentration is below 25% and broker payment history is established. Above that, the rate premium for non-recourse becomes cheap insurance against tail risk. Read the recourse contract for the chargeback window, what counts as a clean delivery, and how the factor handles broker disputes — those terms matter more than the headline advance rate.
Related terms
- Non-Recourse Factoring — Factoring arrangement where the factor absorbs broker insolvency risk on clean deliveries; higher rates than recourse.
- Owner-Operator — Independent trucking professional who owns or leases their truck and operates under their own MC authority or as a subcontractor.
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