Recourse and non-recourse freight factoring are two key financial solutions that one needs to know more about when it comes to ensuring the consistent cash flow in the trucking industry. They are also both similar in that they made advance payments to both a carrier and owner-operators regarding their invoices but are different on the issue of risk in case a client defaults.
In recourse freight factoring, the carrier remains responsible if the shipper or broker doesn’t pay the invoice. This option often comes with lower fees, making it ideal for trucking companies confident in their clients’ reliability. On the other hand, non-recourse freight factoring shifts the risk to the factoring company, which absorbs the loss if the client defaults due to insolvency. While this protection provides peace of mind, it typically involves higher factoring rates.
The decision to select either of the two will depend on the risk tolerance of your business, the history and cash flow requirements of your customer. Recourse factoring is usually preferred by reliable clients and good credit profiles and non-recourse is preferred by businesses with new or risky clients.
At Saint John Capital, experts help trucking professionals evaluate recourse and non-recourse freight factoring options and select the best factoring solution to keep operations running smoothly and finances predictable all year round.
