I am amazed by how many carriers think this is the single most important thing when it comes to freight factoring and getting paid on your loads — because it isn't, and I'd like to tell you why.
What is Recourse? The freight factoring company purchases Rate Cons from carriers for loads that have been delivered and completed. The carrier gets paid ASAP the day of delivery, and the freight factor handles invoicing, billing, and collections. Then the broker pays the freight factor in 30, 60, or 90 days. Carriers sign a contract that can be "recourse," meaning if the freight factor doesn't get paid on the Rate Con within 90 days of delivery, they have the right to charge back the money they paid the carrier — because from their view, the load they bought turned out to be worth nothing since the broker isn't paying. At that point, the carrier needs to call that broker ASAP and get themselves paid.
That's Recourse. A Non-Recourse contract is the opposite — the factoring rate is typically more expensive, since with Non-Recourse the freight factor won't collect the money back from you if the broker doesn't pay.
Here's the real focus: Non-Recourse is more expensive, Recourse is cheaper. You're a business owner, and you're going to do everything you can to protect your business. With a Recourse contract, freight factors give you tools and resources to help make sure you're working with "good" brokers — ones that pay their bills on time. Every broker is analyzed and given a credit score by freight factors, and there are two popular free tools your factor will typically give you: factorfox.com and factorsnetwork.com.
There's an A-to-Z process for vetting brokers before you accept their loads: A) You see a load posted on DAT, find their listed MC#, and check it against one of these websites — they'll say "Broker Approved" or "Broker Denied." B) If approved, call and discuss the load. If denied, that's a shady broker not paying their bills, and you shouldn't work with them — doing so puts your own business at risk.
Your freight factor makes these tools available because they want to protect your business so they can keep processing your loads. The more loads you run, the more you get paid, and the more they make — it's a cycle. They want to help you stay in business and grow so you can buy more trucks and process more loads. Don't view them as leeches; they're providing a necessary service and helping carriers grow and become more profitable, end of story.
At the end of the day, you need to protect your business and check brokers' credit scores regardless. I want to know who I'm working with before accepting a load, and you should too. So Recourse or Non-Recourse — it doesn't matter, because you should be checking your brokers anyway. Since you're checking either way, get a Recourse contract, because it's cheaper.