Factoring
What is factoring? Factoring is selling your unpaid freight invoices to a third party (a factor) for an immediate cash advance, usually 90-97% of the invoice value.
Full definition
Freight factoring converts a 30, 60, or 90-day invoice into cash inside 24 hours. The factor advances most of the invoice up front, collects from the broker or shipper, and pays the trucker the reserve minus a fee when the invoice clears.
Factoring is the most common cash-flow tool in trucking because broker payment terms run far longer than fuel and payroll cycles. It is not a loan — there is no debt on the balance sheet — but the factor takes on the credit risk of the broker for the invoice term.
Rates run from roughly 1.5% to 5% per invoice depending on volume, broker quality, and whether the contract is recourse or non-recourse. High-volume fleets negotiate flat fees; small owner-operators usually pay a flat percentage with no minimums.
Example
- A $2,000 invoice with a 95% advance and 3% fee pays the trucker $1,900 today and $40 reserve when the broker pays.