Cash flow is the lifeblood of any trucking business. You deliver a load on Monday, but the broker doesn't pay for 30, 60, or even 90 days. Meanwhile, you need fuel, insurance payments come due, and truck maintenance doesn't wait. Freight factoring solves this problem.
What Is Freight Factoring?
Freight factoring (also called invoice factoring) is when you sell your unpaid freight invoices to a factoring company at a small discount. Instead of waiting weeks or months for broker payment, the factoring company advances you most of the invoice value — typically within 24 hours of submitting the paperwork.
Here's the basic flow:
- You deliver a load and get a signed BOL
- You submit the invoice and BOL to the factoring company
- They advance you 90-97% of the invoice value (usually same day or next day)
- The factoring company collects payment from the broker
- Once collected, they release the remaining balance minus their fee
Recourse vs. Non-Recourse Factoring
This is the most important distinction to understand:
Recourse Factoring
If the broker doesn't pay, you are responsible for buying back the invoice. Lower fees (1-3%) but you carry the risk of broker non-payment.
Non-Recourse Factoring
The factoring company absorbs the risk if the broker doesn't pay. Higher fees (3-5%) but you're protected from bad brokers.
Typical Factoring Fees
Factoring fees typically range from 1% to 5% of the invoice value, depending on:
- Volume — More invoices usually means lower rates
- Broker credit quality — Better-rated brokers = lower risk = lower fees
- Recourse vs. non-recourse — Non-recourse costs more
- Advance rate — Higher advance percentages may carry higher fees
On a $3,000 load with a 3% factoring fee, you'd pay $90 to get $2,910 today instead of $3,000 in 45 days. For most carriers, that trade-off is well worth it.
Who Should Use Factoring?
Factoring is especially valuable for:
- New carriers who don't have cash reserves to float 30-90 day payment terms
- Growing fleets that need consistent cash flow to add trucks and drivers
- Owner-operators who want to focus on driving instead of chasing payments
- Seasonal carriers who need to manage cash flow through slow periods
What to Watch Out For
Before signing with a factoring company, check for:
- Hidden fees — Application fees, monthly minimums, ACH fees, reserve holdbacks
- Long-term contracts — Some lock you in for 12+ months with early termination fees
- Notification requirements — Some require you to factor ALL invoices, not just the ones you choose
- Fuel card tie-ins — Bundled fuel cards can be a benefit or a restriction depending on the terms
ROADWISE DISPATCH partners with trusted factoring companies to get our carriers paid fast. Learn about our factoring partnerships — coming soon with preferred rates for our carrier network.