Definition
Factoring where the factor absorbs losses if an approved customer becomes insolvent.
Why it matters
It costs more than recourse factoring but transfers credit risk.
Where it shows up in a deal
Non-recourse appears as a defined credit event in the agreement, usually tied to a named buyer and an approved credit limit set before you ship. The factor either carries that risk itself or sits behind a credit insurance policy, and the extra cost shows up as a higher discount rate and tighter limits.
What it affects
- Cover is capped at the approved limit, so shipments above it are unprotected.
- Limits can be reduced or withdrawn for future shipments as a buyer's credit deteriorates.
- A covered loss typically requires a defined event - insolvency or protracted default - not just slow payment.
- The protection is narrower than the name implies and is worth reading word for word.
A worked example
A $200,000 invoice funded at a 90% advance against an approved $200,000 limit: if the buyer files for bankruptcy before paying, the factor absorbs the loss and you keep the $180,000 advance. Ship $250,000 against the same limit and the $50,000 above it sits outside cover.
The common mistake
Related terms
- Full-Recourse FactoringFactoring where the business must buy back invoices that customers don't pay.
- Credit InsuranceInsurance that protects a seller against customer non-payment.
- Concentration LimitA cap on how much of a facility can be tied to a single customer.
- Recourse PeriodThe number of days after which an unpaid invoice must be bought back in recourse factoring.
Questions about how non-recourse factoring affects your facility?
Call (929) 658-8087 or request a written quote — no obligation, no credit impact.
