Non-Recourse A/R = Very Expensive Insurance
Some providers pitch non-recourse factoring like “peace of mind.” In practice, you’re paying a large
insurance premium every week for a risk that’s already very low—and the “coverage” often has carve-outs.
Why We Rarely Recommend Non-Recourse
- The real risk is tiny. In staffing, bad-debt losses are typically well under 1% for well-run books.
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The cost is massive—because it’s charged on payroll, not invoices. For us to take on non-recourse risk,
we must charge 5% on payroll (your biggest expense). If this were priced against invoice face value—as many
A/R factoring companies do—it would be even more expensive. -
Coverage has carve-outs. Disputes, fraud, late pays, and certain bankruptcies often aren’t truly covered.
You’re paying extra for protection that doesn’t fully protect you. -
The math doesn’t pencil. If weekly payroll is $100,000, a 5% non-recourse premium is $5,000 per week.
That’s ~$260,000 per year for an unlikely event—dollars that could fuel recruiting, sales, or margin.
Our Recommendation
Stick with standard recourse funding. You’ll keep more margin, maintain discipline in credit & collections,
and avoid paying a perpetual premium for “insurance” you’ll probably never use.
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Quick Cost Check Weekly Payroll: $100,000 → Non-Recourse Premium (5%): $5,000 / week → ~$260,000 / year. |
FAQ
“Can I still get non-recourse if I insist?”
Yes, but we’ll be candid about the price (5% of payroll) and the carve-outs. Most clients switch back after seeing the math.
“What should I do instead?”
Recourse funding + tight credit approvals, transparent terms, and proactive collections. It’s the best ROI.
Note: The default-rate example is illustrative and varies by portfolio quality, segment, and credit policy.