How does freight factoring work?
In freight factoring, you sell your unpaid invoices to a factoring company, which advances you most of the invoice value right away, often 80-95%, and pays the rest, minus its fee, when the broker pays. Fees commonly run from about 1% to 5% of the invoice, depending on volume, terms and whether the deal is recourse or non-recourse.
Brokers commonly pay carriers 30 days or more after delivery, while diesel, insurance and truck payments are due now. Freight factoring bridges that gap.
How factoring works
- You deliver the load and send the invoice and proof of delivery (plus rate confirmation) to your factor.
- The factor advances a percentage of the invoice, often within about a day. Advance rates commonly fall between 80% and 95%.
- The broker pays the factor, usually on the original terms.
- The factor releases the remaining balance minus its fee.
Cost example
Invoice: $3,000. Factor fee: 3% = $90. If the advance is 90%, you receive $2,700 now, then about $210 when the broker pays ($3,000 minus the $2,700 advance minus the $90 fee).
Whether that is worth it depends on how much faster cash lets you run: paying for fuel, avoiding a costly credit line, or taking better loads instead of waiting.
Recourse vs non-recourse
| Recourse | Non-recourse | |
|---|---|---|
| If broker does not pay | You must repay the advance | Factor may absorb some credit loss |
| Fees | Usually lower | Usually higher |
| Watch for | Chargebacks and disputes | Exclusions and strict rules on what qualifies |
What to compare
- Total cost, including monthly minimums, ACH or wire fees, and termination fees
- Contract length and whether you must factor every invoice
- Advance rate and speed of funding
- Broker credit checks before you book, so you avoid slow payers
- Reserve terms and how disputes are handled
Ask for a sample statement and calculate the total on a real invoice.
Factoring vs quick pay
Some brokers offer quick pay, where the broker pays you faster for a fee (often a percentage). It can be cheaper for occasional use, while factoring suits carriers who need cash flow on every load.
Factoring and dispatch
A dispatcher can build your factoring company's notice of assignment into every broker packet so payment goes to the right place from the start. At Texas Solutions, we handle broker setups and paperwork for a percentage of weekly gross: 5% for semis, 8% for hotshots, 10% for box trucks. See what dispatch costs.
Include factoring costs in your numbers with the cost per mile calculator and check the impact on a load with the load profitability calculator.
Frequently asked questions
How much does freight factoring cost?
Factoring fees are commonly in the range of about 1% to 5% of the invoice, and some companies add other fees. Terms vary widely, so read the contract and calculate the total cost on a typical invoice.
What is the difference between recourse and non-recourse factoring?
With recourse factoring, you are responsible for buying back an invoice the broker fails to pay. With non-recourse, the factor takes on some credit risk if the broker becomes insolvent, though it usually costs more and has exclusions.
What is a notice of assignment (NOA)?
A notice of assignment tells the broker to send payment to the factoring company instead of you. Brokers keep it on file, and a dispatcher or your carrier packet may include it.
