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.
With recourse factoring, you repay the advance if your customer does not pay. With non-recourse factoring, the provider absorbs the bad debt. Non-recourse costs an extra 0.3-1.5% of invoice value but protects against customer insolvency.
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Summary
About 70% of UK invoice finance is recourse (cheaper, you bear customer default risk). Non-recourse adds 0.3-1.5% but the provider or insurer covers non-payment. Non-recourse is backed by credit insurance from firms like Euler Hermes or Atradius. Choose non-recourse for high-risk sectors (construction, retail supply), new customers, or concentrated debtor books. Choose recourse for blue-chip customers and lowest cost.
This page covers
Comparison of recourse and non-recourse factoring including costs, risk, and when to choose each
Not covered here
Bad debt protection details (see /questions/what-is-bad-debt-protection/), provider comparison (see /compare/)
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
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