Trucking finance glossary
Plain-English definitions for the terms that actually show up on factoring contracts, lender applications, and FMCSA filings. Written for owner-operators and small fleets — no academic fluff, no jargon for the sake of it.
A
- Advance RateThe advance rate is the percentage of an invoice's face value that a factoring company pays the trucker up front, typically 90% to 97%.
- AmortizationAmortization is the process of paying off a loan through scheduled equal payments where each payment is split between interest on the remaining balance and reduction of the principal.
- APR (Annual Percentage Rate)APR is the all-in annualized cost of borrowing, expressed as a percentage that includes interest plus most lender fees over a 12-month period.
B
- BackhaulA backhaul is a return load that fills a truck on the trip back to its home base after delivering an outbound load, eliminating deadhead.
- BMC-84BMC-84 is the FMCSA form a freight broker files to demonstrate a $75,000 surety bond is in place, satisfying the financial-responsibility requirement.
- BMC-85BMC-85 is the FMCSA form a freight broker files to show a $75,000 trust fund satisfies the financial-responsibility requirement, in lieu of a surety bond.
- BOC-3Form BOC-3 designates a process agent in every state where a carrier operates, so legal documents can be served on the carrier in that state.
- Broker AuthorityBroker authority is an FMCSA-issued license that allows a freight broker to legally arrange freight transportation between shippers and motor carriers.
C
- Cargo InsuranceCargo insurance covers loss or damage to the freight a motor carrier is hauling, distinct from the carrier's primary liability coverage on the truck itself.
- Carrier AuthorityCarrier authority is the FMCSA-issued Motor Carrier of Property license that lets a trucking company haul regulated freight in interstate commerce for hire.
- Contract RateA contract rate is a pre-negotiated freight rate locked in for a defined term, typically 6-12 months, between a shipper and a carrier or broker.
- Cost Per MileCost per mile (CPM) is the total operating cost to run a truck divided by the miles driven — the single most important profitability metric for owner-operators and small fleets.
- CSA ScoreCSA scores are FMCSA's safety performance ratings of carriers across seven BASIC categories, used to prioritize roadside inspections and audits.
D
- DeadheadDeadhead is mileage a truck runs empty, between unloading one freight and picking up the next, generating cost without revenue.
- DemurrageDemurrage is a fee charged when a container or trailer is held past the free time allowed at a port, rail yard, or shipper facility.
- DetentionDetention is a per-hour fee paid to the carrier when a shipper or receiver holds a truck beyond the free loading or unloading time, typically two hours.
- DOT NumberA DOT number is a unique identifier the Department of Transportation assigns to commercial motor vehicles operating in interstate commerce.
- Drop and HookDrop and hook is a freight model where the driver swaps a pre-loaded trailer at the shipper instead of waiting for live loading or unloading.
- Dry VanA dry van is the standard enclosed trailer (typically 53 feet) used to haul non-perishable, palletized freight, the most common trailer type in trucking.
- DSCR (Debt Service Coverage Ratio)DSCR is a lender ratio that compares a business's net operating income to its total debt obligations — a DSCR above 1.25x is the typical threshold for trucking working-capital and equipment loans.
E
- ELD (Electronic Logging Device)An ELD is a hardware device or hardware-software combo that automatically records a driver's hours of service and engine activity, replacing paper logs.
- Electronic Logging DeviceAn electronic logging device (ELD) is a hardware-software combo that automatically records driver hours of service and engine activity, mandated by FMCSA since 2017.
F
- Factor RateA factor rate is a flat multiplier (e.g. 1.25) that determines the total repayment amount on a merchant cash advance or short-term working-capital loan — not an APR.
- FactoringFactoring is selling your unpaid freight invoices to a third party (a factor) for an immediate cash advance, usually 90-97% of the invoice value.
- FlatbedA flatbed is an open-deck trailer (typically 48 feet) used to haul oversized, irregularly shaped, or otherwise unenclosed freight like steel, lumber, and machinery.
- Fleet CardA fleet card is a payment card issued to a trucking company that controls fuel and related purchases, often with per-gallon discounts and IFTA reporting.
- FOB (Free On Board)FOB defines the point in shipment where title and freight charges transfer from shipper to buyer — FOB Origin transfers at the shipping dock, FOB Destination at delivery.
- Freight BondA freight bond is a $75,000 financial guarantee a freight broker must maintain to cover unpaid carrier invoices in the event of broker insolvency.
- Freight BrokerA freight broker is a licensed intermediary that matches shippers with carriers, taking a margin between what the shipper pays and what the carrier receives.
- Fuel CardA fuel card is a payment card tied to a fleet account that gives discounts at participating truck stops and tracks fuel spend by driver and unit.
G
H
- Hazmat EndorsementA hazmat endorsement (H) on a CDL allows a driver to haul Hazardous Materials, requiring TSA background checks and additional state and federal testing.
- HOS (Hours of Service)Hours of Service rules cap how long a commercial driver can drive and work before required rest, with strict daily and weekly limits.
I
- IFTAIFTA (International Fuel Tax Agreement) is a single-license fuel tax reporting system for interstate carriers operating across the US and Canadian provinces.
- IFTA ReportingIFTA reporting is the quarterly process of filing miles-per-state and fuel-purchased-per-state data so the base jurisdiction can settle fuel taxes across states.
- IntermodalIntermodal trucking moves shipping containers between rail terminals, ports, and shippers, using a chassis to haul the container short distances.
- Intermodal FreightIntermodal freight moves in a shipping container between rail, ship, and truck without being unloaded between modes — the container is the cargo unit.
L
- LaneA lane is a defined origin-to-destination freight route, e.g. Atlanta to Dallas, used by brokers and carriers to price loads and plan capacity.
- Lease-PurchaseA lease-purchase is a truck-acquisition program where a driver leases a truck from a carrier and credits payments toward eventual ownership.
- Less-Than-Truckload (LTL)LTL is a freight shipping model where multiple shippers share trailer space — each pays only for the portion of the trailer their freight occupies.
- Line HaulLine haul refers to the long-distance portion of a freight movement, distinct from local pickup, delivery, and yard work.
- Line of CreditA line of credit is a revolving working-capital facility where the borrower draws what they need, pays interest only on the outstanding balance, and re-borrows as it pays down.
- Lumper FeeA lumper fee is the cost paid to a third-party labor service that unloads freight at a receiver — common at grocery warehouses and produce houses.
M
- MC AuthorityMC authority is the FMCSA-issued operating permit (Motor Carrier Number) that allows a carrier to haul regulated freight across state lines for hire.
- MCA (Merchant Cash Advance)A merchant cash advance is a lump-sum advance repaid as a fixed daily or weekly debit from the business's bank account, priced as a flat fee rather than APR.
N
O
- OTR (Over-the-Road)OTR is long-haul trucking where the driver is away from home for days or weeks, running interstate lanes with sleeper-equipped tractors.
- Owner-OperatorAn owner-operator is a trucker who owns their truck and either runs under their own MC authority or leases on to another carrier's authority.
P
- Per DiemPer diem is a daily allowance paid to drivers for meals and incidentals while away from home, typically untaxed up to the IRS-set rate.
- Power-OnlyPower-only is a freight model where the carrier provides only the tractor — the shipper or broker provides the trailer.
- Primary Liability InsurancePrimary liability is the required commercial auto liability coverage that pays for bodily injury and property damage a trucker causes to others — the FMCSA-mandated minimum is $750,000 for general freight.
R
- Rate ConfirmationA rate confirmation is the written agreement between broker and carrier specifying the freight, lane, pay, and terms for a single load.
- Rate Per Mile (RPM)Rate per mile is the freight payment divided by the loaded miles on a load — the most common per-mile economic metric in trucking.
- Recourse FactoringRecourse factoring is a factoring contract where the carrier is required to buy back any invoice the broker fails to pay, leaving credit risk with the carrier.
- Recourse vs Non-Recourse FactoringRecourse factoring means the trucker buys back the invoice if the broker doesn't pay; non-recourse factoring means the factor absorbs the loss on broker insolvency.
- ReeferA reefer is a refrigerated trailer with an onboard cooling unit, used to haul temperature-sensitive freight like produce, meat, dairy, and pharmaceuticals.
- Regional HaulRegional haul is freight running within a defined multi-state region, typically returning the driver home weekly.
S
T
- Team DriverTeam driving is two drivers in one truck alternating driving and sleeping, allowing the truck to run nearly continuously across long lanes.
- TerminalA terminal is a freight handling facility where carriers consolidate, sort, and dispatch loads — central to LTL, intermodal, and large-fleet operations.
- Third-Party Logistics (3PL)A 3PL is a company that arranges and manages freight transportation on behalf of shippers without owning trucks themselves — brokers and freight forwarders are both 3PLs.
- TRAC LeaseA TRAC lease (Terminal Rental Adjustment Clause) is an open-end commercial truck lease that sets a residual value up front and trues it up against the actual sale price at lease end.
- TractorA tractor is the truck portion of a tractor-trailer — the powered unit with the cab and fifth wheel that pulls trailers.
- Trailer InterchangeTrailer interchange is an agreement where one carrier hauls a trailer owned by another carrier or shipper, with insurance covering damage to the borrowed trailer.
- Truckload (TL)Truckload (TL) is full-truck freight where a single shipper occupies the entire trailer — the most common freight model in long-haul trucking.