Recourse vs. Non-Recourse Factoring
Whether you (recourse) or the factor (non-recourse) bears the loss if an invoice ultimately isn't paid.
The difference comes down to who carries the credit risk. With recourse factoring, your business remains responsible if the customer ultimately doesn't pay the invoice; it typically carries a lower fee. With non-recourse factoring, the factor absorbs the loss if the customer can't pay due to insolvency, shifting more risk to the funder, usually at a higher fee.
In government contract factoring, this distinction matters less than in commercial factoring, because the payer is the U.S. federal government — which essentially never defaults. The credit risk that recourse vs. non-recourse is designed to allocate is minimal when the customer is a federal agency.
When evaluating a factoring partner, understand which structure they offer and what triggers recourse, so there are no surprises.
Frequently asked questions
What's the difference between recourse and non-recourse factoring?
With recourse, you're liable if the invoice goes unpaid; with non-recourse, the factor absorbs that credit risk (usually at a higher fee). With federal receivables the payer is the government, so the risk either structure addresses is minimal.
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