Recourse vs non-recourse factoring
The same advance, the same collections, one difference: who is on the hook if a customer never pays.
- Bad-debt risk, recourseYou carry it
- Bad-debt risk, non-recoursePartner carries it
- CoversInsolvency / default only
- Cost vs recourseHigher, ongoing
- Most UK factoring isRecourse
Side by side
| Recourse factoring | Non-recourse factoring | |
|---|---|---|
| Who carries bad-debt risk | You | The funding partner, within defined limits |
| Typical cost vs recourse | Baseline | Higher, an added credit-protection fee |
| What is covered | Nothing, unpaid invoices are clawed back | Usually insolvency or protracted default only |
| Customer approval needed | No | Yes, each customer is credit-checked and given a cover limit |
| Best suited to | Established, well-known customer books | Larger, more concentrated or less familiar customer books |
What non-recourse does not cover
- Disputes over the quality, quantity or delivery of goods and services
- Invoices raised to a customer above their approved credit limit
- Customers who simply do not qualify for cover in the first place
- Slow payment that never actually reaches insolvency or protracted default
Worked example
The same £30,000 unpaid invoice, one customer insolvency, compared under each structure:
How to choose
If your customer book is concentrated in a small number of large accounts, or includes customers you do not know well, the insolvency protection of non-recourse factoring can be worth the added cost. If your book is broad, well-established and rarely defaults, recourse factoring is usually the cheaper choice, and we will say so rather than upsell cover you are unlikely to need. See invoice factoring for the full cost anatomy either way.
Frequently asked questions
The funding partner deducts the advanced amount back from your account, usually after an agreed period (commonly 90 days) past the invoice due date. You then chase the debt yourself or write it off, the bad-debt risk sits with you throughout.
No. Non-recourse protection almost always covers insolvency or protracted default of an approved customer, not disputes over goods or services, short deliveries, or invoices raised outside agreed credit limits. Read the exclusions before assuming a bad debt is covered.
It removes one specific risk, a customer becoming insolvent, at a real ongoing cost. If your customer book is small, well-established and rarely defaults, paying for that protection every month can cost more over a year than the bad debt it would occasionally prevent.
Some funding partners offer this, insuring only your larger or higher-risk customers on a non-recourse basis while the rest of the book runs recourse. It is worth asking for explicitly, it is not always offered by default.
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See how much you could releaseLast reviewed: August 2026
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