Cash flow is the number one killer of trucking companies. You deliver a load today, but you don't get paid for 30, 45, or even 60 days. Meanwhile, fuel costs, driver pay, insurance, and maintenance don't wait. Freight factoring bridges that gap.
What Is Freight Factoring?
Freight factoring (also called invoice factoring or accounts receivable factoring) is a financial arrangement where you sell your unpaid invoices to a factoring company at a discount. They pay you immediately (usually within 24 hours), then collect payment from your customer.
How it works: 1. You deliver a load and invoice the shipper/broker 2. You submit the invoice to your factoring company 3. They advance you 90–97% of the invoice amount within 24 hours 4. Your customer pays the factoring company on their normal terms (30–60 days) 5. The factoring company sends you the remaining balance minus their fee
Factoring Costs
| Fee Type | Typical Range |
|---|---|
| Factoring rate | 1.5% – 5% per invoice |
| Advance rate | 90% – 97% of invoice |
| Reserve holdback | 3% – 10% (returned after collection) |
| ACH/wire fee | $0 – $5 per transaction |
| Monthly minimum | $0 – $500 (some companies) |
Example: You have a $5,000 invoice with a 3% factoring rate and 95% advance: - Day 1: Factor advances $4,750 (95%) - Day 30: Customer pays $5,000 to factor - Day 31: Factor sends you $100 ($250 reserve minus $150 fee) - Total cost: $150 for immediate cash flow
Recourse vs Non-Recourse
Recourse Factoring (Lower Rates)
- You are responsible if the customer doesn't pay
- Factor returns the unpaid invoice to you after 60–90 days
- Rates: 1.5% – 3%
- Best for: Companies with creditworthy customers
Non-Recourse Factoring (Higher Rates)
- The factor absorbs the loss if the customer doesn't pay
- Factor takes on the credit risk
- Rates: 3% – 5%
- Best for: Companies hauling for unknown brokers
Benefits of Factoring
- Immediate cash flow — pay drivers, buy fuel, cover expenses without waiting
- No debt — factoring is not a loan; it doesn't add to your balance sheet
- Credit checking — factors check your customers' credit for free
- Collections — factor handles chasing late payments
- Growth fuel — take more loads without cash constraints
- No personal guarantee (non-recourse)
Risks and Downsides
- Cost — factoring fees reduce your profit margin
- Customer relationships — your customers know you're factoring
- Contract lock-in — some factors require 6–12 month minimums
- Hidden fees — read the fine print (wire fees, monthly minimums, early termination)
- Over-reliance — factoring should be a bridge, not a permanent crutch
How to Choose a Factoring Company
Questions to Ask
- What is your advance rate and factoring fee?
- Is it recourse or non-recourse?
- Is there a monthly minimum volume requirement?
- What is the contract length? Can I cancel anytime?
- Are there hidden fees (ACH, wire, statement, monthly)?
- How fast do you fund? Same-day or next-day?
- Do you have a fuel card program?
- Do you do credit checks on my customers?
- What happens if my customer pays late?
- Do you integrate with TMS software?
Red Flags
- Contracts longer than 12 months
- Early termination fees over $500
- Monthly minimum volume requirements above $10,000
- Fees that seem too low (hidden costs elsewhere)
- No clear explanation of reserve holdback return
Factoring in TruckerPro
TruckerPro's Finance module tracks factored invoices end-to-end: - Factoring company management — store rates, contacts, advance rates - Batch submissions — submit multiple invoices to your factor at once - Automatic fee calculation — tracks factoring fees against each invoice - Reserve tracking — monitor holdback and release amounts - Aging reports — see outstanding factored vs unfactored receivables - QuickBooks/Xero sync — factoring transactions flow to your accounting
Stop managing factoring in spreadsheets. Let your TMS handle the math.