Invoice factoring solves the #1 cash flow problem in trucking: you deliver a load today but don't get paid for 30-90 days. Factoring companies buy your invoices at a discount and pay you immediately.
How Freight Factoring Works
- You deliver a load and get a rate confirmation
- You submit the invoice to the factoring company (online or via app)
- The factor advances you 90-97% of the invoice value within hours
- The factor collects payment from the broker/shipper
- Once collected, you receive the remaining 3-10% minus the factoring fee
Factoring Rates and Fees
| Factor Type | Advance Rate | Fee per Invoice | Best For |
|---|---|---|---|
| Recourse (standard) | 92-97% | 1.5-3.5% | Established carriers |
| Non-recourse | 90-95% | 2.5-4.5% | New carriers, risk protection |
| Spot factoring | 90-95% | 3-5% per invoice | Occasional use |
| Contract factoring | 93-97% | 1.5-3% | All invoices, volume discount |
Example: You haul a $3,000 load. Factor advances 95% = $2,850 same day. Broker pays factor in 35 days. Factor releases remaining $150 minus 2.5% fee ($75). You receive $75 more. Total received: $2,925.
Factoring vs Waiting for Payment
| Scenario | Without Factoring | With Factoring |
|---|---|---|
| Invoice amount | $3,000 | $3,000 |
| When you get paid | 30-45 days | Same day ($2,850) |
| Amount received | $3,000 | $2,925 (after 2.5% fee) |
| Cost | $0 cash but lost time value | $75 per $3,000 invoice |
| Monthly cash flow impact | Negative for first 30-45 days | Immediate positive |
When Factoring Makes Sense
Use factoring if:
- You're a new carrier with no cash reserves
- Your customers pay net 30-90 and you need fuel money now
- You're growing fast and need to cover expanding operating costs
- You want to take more loads without waiting for previous ones to pay
Skip factoring if:
- Your customers pay within 7-14 days
- You have 60+ days of cash reserves
- You're running dedicated lanes with advance pay
- The 2-3% fee significantly impacts your margins
Hidden Fees to Watch For
Some factoring companies sneak in extra charges:
- Setup fee: $0-$500 (one-time)
- Monthly minimum: $500-$2,000 (charge even if you don't factor)
- ACH/wire fees: $5-$30 per transaction
- Invoice processing fee: $1-$5 per invoice
- Credit check fee: $5-$15 per new customer
- Termination fee: $500-$5,000 (locked contract)
Always ask for a full fee schedule before signing.
Factoring and Equipment Financing
Many owner operators use factoring alongside equipment financing. The factoring provides operating cash flow while the equipment loan covers the truck payment. These are complementary, not competing, products.
Need equipment financing? Apply at brobascap.com or call (773) 691-3925