What is freight factoring?

Freight factoring is when you sell your unpaid invoices to a factoring company for immediate cash. Instead of waiting 30-90 days for a broker to pay, you get 90-97% of the invoice value within 24 hours. The factoring company then collects payment from the broker and keeps a small percentage (1-5%) as their fee.

What is the difference between recourse and non-recourse factoring?

With recourse factoring, if the broker doesn't pay, you're responsible for buying back the invoice. With non-recourse factoring, the factoring company absorbs the loss if the broker defaults (though only for credit-related defaults, not disputes). Non-recourse has higher fees (typically 1-2% more) but protects you from broker bankruptcies.

How much does freight factoring cost?

Factoring rates typically range from 1% to 5% of the invoice value. Rates depend on your monthly volume, creditworthiness of your brokers, recourse vs non-recourse, and the factoring company. High-volume carriers can negotiate rates as low as 1-2%. Watch for hidden fees like ACH fees, setup fees, and minimum volume penalties.

Do I need freight factoring if I have a dispatch service?

Not necessarily, but many owner-operators use both. Dispatch services find and book loads; factoring services solve cash flow timing. If your brokers pay within 15-20 days and you have sufficient cash reserves, you may not need factoring. If you're waiting 45-90 days for payment, factoring can keep your business running.

Can factoring companies reject my invoices?

Yes. Factoring companies assess the creditworthiness of the broker or shipper on each invoice. If a broker has poor credit or payment history, the factoring company may decline that invoice or offer a lower advance rate. Most major brokers are easily factorable.

Freight Factoring Guide | Truck Dispatch Experts

How Freight Factoring Works

You deliver a load. The broker owes you $3,500. But their payment terms say "Net 30" — meaning you won't see that money for a month. Meanwhile, you need fuel, insurance is due next week, and your truck payment is in 10 days. This is the cash flow problem that freight factoring solves.

With factoring, you submit your invoice and proof of delivery to the factoring company. Within 24 hours (sometimes same-day), they advance you 90-97% of the invoice value. On that $3,500 load, you might receive $3,325-3,395 immediately. The factoring company then collects the full $3,500 from the broker and keeps the difference as their fee.

Deliver the Load — Complete delivery and get your POD (proof of delivery) signed.

Submit Invoice — Send the rate confirmation, BOL, and POD to your factoring company.

Get Paid — Receive 90-97% of the invoice value within 24 hours via ACH or fuel card.

Factor Collects — The factoring company collects full payment from the broker (30-90 days later).

Factoring rate comparison showing recourse versus non-recourse rates and fee structures — Recourse factoring costs 1-3% while non-recourse runs 2-5% — the tradeoff is risk protection

Recourse vs Non-Recourse Factoring

Recourse Factoring

1-3% fee

If the broker doesn't pay, you buy back the invoice. You carry the risk of non-payment.

Best for:

✓ Working with reliable, well-known brokers
✓ High-volume carriers wanting lowest rates
✓ Carriers who vet broker credit themselves

Non-Recourse Factoring

2-5% fee

The factoring company absorbs the loss if a broker defaults due to credit issues. You're protected from broker bankruptcies.

Best for:

✓ New carriers without broker relationships
✓ Carriers working with many different brokers
✓ Risk-averse operators wanting peace of mind

Important: "Non-recourse" typically only covers credit-related defaults (broker bankruptcy, insolvency). It usually does NOT cover disputes over freight damage, service issues, or double-brokered loads.

Hidden Fees to Watch For

The advertised factoring rate is often just the beginning. Many factoring companies add fees that significantly increase your effective cost:

⚠ACH/wire fees — $5-30 per transaction. On daily funding, this adds up fast.
⚠Monthly minimums — Requiring $10,000-50,000+ in minimum monthly factoring. Below the minimum, you pay a penalty.
⚠Invoice processing fees — $1-10 per invoice submitted, regardless of size.
⚠Credit check fees — Charging you for credit checks on brokers that should be included in the service.
⚠Termination fees — Charging a penalty for ending the relationship. Some charge $500-2,000+.

Always ask for a complete fee schedule in writing before signing. Calculate your total effective cost including all fees, not just the headline rate.

When Factoring Makes Sense (and When It Doesn't)

Factoring Makes Sense When:

• You're a new carrier with limited cash reserves
• Brokers pay on Net 30-90 terms
• You need predictable cash flow for payments
• You're growing and need fuel/operating capital
• The cost is less than a bank line of credit

You May Not Need Factoring When:

• You have 2-3 months of expenses in reserves
• Most of your brokers pay within 15-20 days
• You have a business line of credit with lower rates
• You work primarily with quick-pay brokers
• Your monthly volume is below $5,000 (fees eat margins)

Related Resources

How Truck Dispatch Works — Learn how dispatch and factoring work together
Our Pricing — Transparent dispatch fees with no hidden charges
DAT — Check broker credit scores before booking loads
New Authority Checklist — Setting up factoring as a new carrier

TDE

Truck Dispatch Experts

Published Apr 12, 2025 · Updated Jan 15, 2026

Freight Factoring Guide for Truckers