Recourse vs Non-Recourse Factoring

The difference between recourse and non-recourse factoring is who bears the risk if your customer doesn't pay. With recourse factoring, you repay the advance if the customer defaults. With non-recourse factoring, the finance provider absorbs the bad debt. Non-recourse costs an additional 0.3-1.5% of invoice value but gives you protection against customer insolvency.

Side-by-Side Comparison

Feature	Recourse	Non-Recourse
If customer doesn't pay	You repay the advance	Provider absorbs the loss
Additional cost	None	0.3-1.5% of invoice value
Risk level	You bear customer default risk	Provider/insurer bears risk
UK market share	~70%	~30%
Best for	Confident in customer creditworthiness	High-risk sectors, new customers
Balance sheet treatment	May be treated as borrowing	Can be off-balance-sheet

When to Choose Non-Recourse

You supply to construction companies or retailers with higher insolvency risk
You are taking on new customers whose creditworthiness is uncertain
A single customer represents a large percentage of your turnover
You want to keep the facility off your balance sheet

When to Choose Recourse

Your customers are blue-chip, government, or well-established companies
You want the lowest possible cost
You already have separate trade credit insurance

Oliver Mackman

Director, Market Invoice

Oliver leads Market Invoice's editorial and comparison research. With a background in UK commercial finance, he oversees provider analysis, rate verification, and industry reporting across all verticals.

Last reviewed: 5 April 2026

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Recourse vs Non-Recourse FAQ

What happens if my customer goes bust with recourse factoring?

With recourse factoring, you must repay the advance to the finance provider. This typically happens by deducting it from future advances or requiring direct repayment within 60-90 days. You bear the full risk of customer non-payment.

How much extra does non-recourse cost?

Non-recourse factoring typically adds 0.3-1.5% of invoice value on top of standard fees. On a £100,000 invoice, that is £300-£1,500 extra. The exact premium depends on the credit quality of your customers and your industry.

Is non-recourse factoring like credit insurance?

Yes, it functions similarly. The provider uses credit insurance (often from Euler Hermes or Atradius) to cover customer non-payment. If a covered customer fails to pay, the insurer pays out and you are not liable for repayment.

Which type do most businesses choose?

Approximately 70% of UK invoice finance facilities are recourse. Many businesses choose recourse because it is cheaper and they have confidence in their customers' ability to pay. Non-recourse is more popular in industries with higher customer default risk, such as construction and retail supply chains.