What is freight factoring?

Freight factoring, in one sentence

Sell your unpaid invoice to a factor today for an advance. The factor collects from the broker later.

You deliver a load. The broker says they'll pay on net terms that commonly stretch several weeks. Your fuel card, driver pay, truck payment, and insurance don't wait that long. So you sell that invoice to a factoring company. They hand you most of the money within about a day. When the broker finally pays, the factor keeps a small fee and sends you the rest.

That's it. Freight factoring (also called load factoring) is a cash-flow tool, not a loan. You're selling an asset at a small discount.

How freight factoring works, step by step

1. You deliver the load and get the signed rate confirmation and bill of lading.
2. You submit the paperwork to your factor instead of waiting on the broker.
3. The factor verifies the broker's credit and that the load was hauled.
4. You get an advance, usually most of the invoice (the advance rate varies by carrier profile; confirm yours), within 24 hours. Same-day is common.
5. The broker pays the factor when the invoice comes due, commonly weeks later.
6. The factor sends you the reserve, minus their fee.

What does freight factoring cost?

Across the market, the factoring fee is a small percentage of the invoice and varies by deal (confirm your specific quote). Three things move your number:

• Volume. More loads factored means a lower rate.
• Customer credit. The factor is buying the broker's promise to pay. Strong-credit brokers cost less to factor.
• Recourse vs. non-recourse. Non-recourse costs more because the factor takes the credit risk. Usually half a percent to a point and a half extra.

Ask whether the quote is flat or tiered. A flat rate stays the same if a broker pays late. A tiered rate goes up every 30 days the invoice sits unpaid. A cheap tiered rate can cost more than a slightly higher flat one.

Recourse vs. non-recourse factoring

Recourse means if the broker doesn't pay, you buy the invoice back from the factor. It's cheaper. Use it when you trust the broker.

Non-recourse means the factor eats the loss if a covered customer fails. It costs more. Read what "covered" actually triggers. Some non-recourse clauses only pay out on a formal broker bankruptcy. If the broker just goes slow or vanishes, you could still be on the hook.

When freight factoring is worth it

• Your brokers pay in 30+ days and your cash reserves are thin.
• You're a new carrier and can't float a month of operating costs.
• You want to take a load from a new broker without taking on their credit risk (non-recourse).

When it's not

• Your brokers pay in 15 days or less and you have reserves.
• You're hauling for one or two customers with ironclad credit.
• You'd be factoring just to cover a truck payment you can't afford. That's a margin problem factoring won't fix for long.

Load factoring vs. freight factoring

Same thing. In trucking, "load factoring" and "freight factoring" both mean selling a single invoice for a hauled load. Use whichever phrase you want. They point at the same product.

Ready to look at actual companies? Our best factoring companies for trucking page compares six reputable factors by advance rate, fee, and recourse terms. New MC holder? Start with the factoring for new carriers page. And if you haven't yet, walk through the federal items on our new-authority compliance checklist too, factoring won't cover those.