Recourse

Recourse describes which party carries the risk that a customer never pays a factored invoice. Under a recourse agreement, the business that sold the invoice must buy it back or replace it if the customer does not pay within a stated period. Under a non-recourse agreement, the factor absorbs the loss, but usually only for defined reasons, often the customer's insolvency.

Non-recourse rarely covers disputes about the work itself, such as a short pay for a damaged load or a rejected pay application, so the seller often still carries that risk. The distinction affects cost and should be read closely in the agreement, including the definition of the events that trigger recourse and the time limits around them.