The difference between recourse and non-recourse factoring comes down to what happens if a customer fails to pay an invoice. As your invoice finance provider releases funds upfront, within 24-48 hours, an unpaid invoice causes problems as by the time it falls past due, you will have already borrowed money against it.
Recourse factoring agreements leave the responsibility at your door, and you will be responsible for covering the lender's costs and repaying them.
Non-recourse agreements, mean that there is no comeback for an unpaid invoice, with the lender taking the financial hit. For this reason, it is often referred to as bad debt protection. Bad debt protection does come at a cost, however, as all insurance does. In this case, through the form of a slightly higher cost.