In This Article
What Is Invoice Factoring?
Invoice factoring is the process of selling your unpaid invoices (accounts receivable) to a factoring company in exchange for immediate cash. The factor advances you 80-95% of the invoice value upfront, then collects payment from your customer. Once your customer pays, the factor releases the remaining balance minus their fee (typically 1-5% of the invoice value). It's one of the oldest forms of business financing and remains one of the most effective cash flow tools for B2B companies.
How Trucking Factoring Works
Factoring is exceptionally popular in trucking because freight brokers and shippers typically pay on 30-90 day terms, but drivers need cash for fuel, maintenance, and living expenses now. Trucking factoring companies like RTS Financial, Apex Capital, OTR Solutions, and Triumph Business Capital specialize in transportation receivables. Many offer additional services like fuel card programs, credit checks on brokers, and load board access. Rates in trucking factoring typically range from 1-5% per invoice.
Recourse vs. Non-Recourse Factoring
Recourse factoring means you're responsible if your customer doesn't pay — the factor can "recourse" the invoice back to you. This is the most common type and has lower fees. Non-recourse factoring means the factor absorbs the credit risk if your customer can't pay (but usually not if the customer disputes the invoice). Non-recourse factoring has higher fees because the factor is taking on more risk. Most trucking factoring is recourse.
Factoring vs. Invoice Financing
With factoring, you sell the invoice and the factor collects from your customer — your customer knows you're using a factor. With invoice financing, your invoices serve as collateral for a loan, but you maintain the customer relationship and collect payments yourself. Invoice financing is more "invisible" to your customers but typically requires stronger credit and is less common in trucking.
Best For
- Trucking companies waiting on broker/shipper payments
- B2B businesses with 30-90 day payment terms
- Growing companies that need to fund operations while waiting on receivables
- New businesses that can't qualify for traditional financing