Recourse vs Non-Recourse Factoring
The difference between recourse and non-recourse factoring comes down to who absorbs the loss when a customer does not pay. With recourse factoring, you buy the invoice back if the customer fails to pay within the agreed period. With non-recourse factoring, the factoring company takes the loss, but only in cases of debtor insolvency or bankruptcy on pre-approved debtors. MJN Services (MC#375676) offers both options to carriers and has funded 26,000+ loads since March 2000 (as of 2026).
MJN offers both, with the same same-day funding and the same advance rates on either one. The choice comes down to your customer mix, and this is how to make it.
What Is Recourse Factoring?
Recourse is the more common arrangement in freight. In practice:
You haul a load for a shipper and submit the invoice to your factoring company. The factoring company advances up to 95% of the invoice value, less the factoring fee, which comes out at funding. At MJN Services, invoices submitted by 1:00 PM MST are paid the same day. The factoring company then collects from the shipper.
If the shipper pays on normal terms, the reserve is released to you, less any short pays, claims or additional factoring fees.
If the shipper does not pay within the recourse period, you are responsible for buying back the invoice. At MJN Services, the standard recourse period is 60 days.
Why carriers choose recourse factoring:
- Lower factoring rates (because the factoring company carries less risk)
- Available for a wider range of customers
- Straightforward terms with clear obligations
- Works well when you haul for established, reliable shippers with a track record of paying on time
What Is Non-Recourse Factoring?
Non-recourse moves the credit risk on your customer to the factoring company. If an approved customer becomes insolvent or files for bankruptcy, the factoring company absorbs the loss.
That is what non-recourse is built for: the customer who goes under owing you money. It is not a general payment guarantee, so a slow payment or a disputed invoice runs through the normal recourse process instead. MJN’s credit team reviews each debtor and tells you which of your customers qualify.
Why carriers choose non-recourse factoring:
- Protection against catastrophic loss if a major customer goes bankrupt
- An independent credit check on unfamiliar shippers before you commit to the load
- Reduced exposure on the accounts you know least well
The protection that does the most work comes earlier. Before any of this applies, MJN runs credit on your customers and factors invoices from pre-approved shippers and brokers it knows, which is what keeps a bad debtor out of your invoice pool in the first place. Non-recourse is the backstop, not the first line.
Recourse vs. Non-Recourse: Side-by-Side Comparison
| Feature | Recourse Factoring | Non-Recourse Factoring |
|---|---|---|
| Your risk | You cover unpaid invoices after recourse period | Factoring company absorbs loss for debtor insolvency |
| Coverage scope | All approved invoices | Only pre-approved debtors; only insolvency/bankruptcy |
| Typical rate | Lower (less risk to factoring company) | Higher (factoring company takes on credit risk) |
| Best for | Carriers with reliable, established customers | Carriers working with newer or less familiar shippers |
| What you get at MJN | Same-day pay, advances up to 95%, rates from 1.5% | Same-day pay, advances up to 95%, plus insolvency cover on approved debtors for an additional fee |
Both types still involve a credit evaluation of your customers. The difference is what happens when a customer cannot or will not pay. With recourse, you bear that risk. With non-recourse, the factoring company bears the insolvency risk on debtors they have specifically approved.
When Should a Carrier Choose Recourse vs. Non-Recourse?
It comes down to who you haul for and how much a bad debt would hurt.
Choose recourse if your customers are established and reliable. If you haul primarily for large shippers or well-known brokers with strong payment histories, the risk of non-payment is low. Recourse factoring gives you lower rates because the factoring company is confident they will collect. You are accepting a risk that, historically, rarely materializes with creditworthy customers.
Choose non-recourse if you work with newer or less familiar shippers. If your customer mix includes companies you have not worked with before, or shippers in industries with higher bankruptcy rates, non-recourse gives you a safety net against the worst-case scenario. The higher rate is essentially an insurance premium against debtor insolvency. This is especially relevant for owner-operators who may have less flexibility to absorb a bad debt.
Consider a blended approach. Some carriers use recourse for their core, long-standing customer relationships and non-recourse for newer accounts where they have less confidence in the debtor’s financial stability. This lets you manage costs on reliable loads while protecting yourself on less certain ones.
Price the difference. Non-recourse is offered for an additional fee. At MJN you work this out with your account representative, not a system: a person reads your customer list and walks through the options with you. Ask us to quote it against your mix so you can weigh the cost against the risk you are carrying.
Can You Switch Between Recourse and Non-Recourse?
Yes. At MJN Services, carriers can discuss their factoring arrangement with their account representative at any time. The availability of non-recourse terms depends on the specific debtors in your customer mix, since the factoring company must approve each debtor for non-recourse coverage individually.
Some carriers start on recourse and add non-recourse for specific customers later. Others go the other way as they get to know who pays. MJN offers both, and you move a customer from one to the other by asking.
Related guides
- What factoring is in trucking, in plain terms
- The 7 factors that matter when choosing a factoring company
- How to choose the best factoring company for truckers
MJN Services offers both recourse and non-recourse factoring. Advance rates up to 95%, rates as low as 1.5%, same-day ACH, and the first 30 days free. Send us your customer list and we will quote both against it, so you can see the cost next to the risk you are carrying. Contact us or see our factoring services.