What Is Freight Factoring?
Freight factoring (also called invoice factoring or accounts receivable factoring) is when you sell your unpaid invoices to a factoring company in exchange for immediate cash — typically within 24-48 hours.
Instead of waiting 30-45 days for a broker or shipper to pay you, the factoring company pays you right away (minus a fee), then collects payment from the broker directly.
How Factoring Works — Step by Step
- You deliver the load and send the invoice to your factoring company
- The factoring company advances you 90-97% of the invoice amount within 24 hours
- The factoring company collects payment from the broker (net 30-45 days)
- Once the broker pays, the factoring company sends you the remaining balance minus their fee
Example
| Step | Amount |
|---|---|
| Load rate | $2,800 |
| Advance (95%) | $2,660 — paid to you within 24 hours |
| Factoring fee (3%) | -$84 |
| Reserve release | $56 — paid after broker pays |
| Your total received | $2,716 |
Factoring Rates Explained
Factoring fees typically range from 1.5% to 5% of the invoice amount. The rate depends on your volume, the broker credit quality, and the factoring company.
| Monthly Volume | Typical Rate |
|---|---|
| Under $20,000 | 3% – 5% |
| $20,000 – $100,000 | 2% – 3% |
| $100,000+ | 1.5% – 2% |
Recourse vs Non-Recourse Factoring
Recourse factoring: If the broker does not pay, you owe the money back to the factoring company. Lower fees (1.5-3%), more common.
Non-recourse factoring: If the broker does not pay due to insolvency, the factoring company absorbs the loss. Higher fees (3-5%), but protects you from bad debt.
Most carriers use recourse factoring since reputable brokers rarely default. Always check broker credit scores on DAT before hauling.
Top Freight Factoring Companies
- RTS Financial — Large company, competitive rates, good technology
- OTR Capital — No long-term contracts, popular with owner operators
- Triumph Business Capital — Strong fuel card integration
- Riviera Finance — Non-recourse specialist
- Porter Freight Funding — Small carrier focused
When Does Factoring Make Sense?
Factoring is worth the cost when:
- You are starting out and need consistent cash flow
- Your customers pay slow (net 30-45 days) and it hurts operations
- You are growing fast and need capital to cover expenses
- Fuel costs are eating into cash before loads pay
Factoring may NOT be worth it when you have strong cash reserves, your customers pay quickly (net 7-15 days), or you are moving very high volume loads where 3% adds up significantly.
Factoring vs Line of Credit
If you qualify for a business line of credit (typically requires 2+ years in business and good credit), it is usually cheaper than factoring. However, factoring is more accessible for new carriers and does not require collateral.
How TruxlyOS Works With Factoring
TruxlyOS makes factoring easier by generating professional invoices with all required details (load number, BOL reference, pickup and delivery, commodity) that factoring companies require. You can email invoices directly from TruxlyOS to your factoring company with one click.
