Complete guide to freight factoring for owner-operators and small carriers — what factoring is, recourse vs non-recourse, typical rates, how the process works step by step, pros and cons, and when to use factoring vs waiting for broker payment.
return ( What Is Freight Factoring? Freight factoring (also called freight bill factoring or accounts receivable factoring) is a financial service where you sell your unpaid freight invoices to a factoring company in exchange for immediate payment.
Instead of waiting 30, 45, or even 90 days for a broker or shipper to pay you, the factoring company advances you most of the invoice amount within 24 hours, then collects the full payment from the broker later.
Here's the basic concept: You deliver a load and have an invoice for $3,000.
The broker's payment terms are Net 30 (they'll pay in 30 days).
You submit the invoice to your factoring company.
The factoring company pays you $2,850-$2,940 within 24 hours (95-98% of the invoice).
The factoring company then collects the full $3,000 from the broker in 30 days.
The difference ($60-$150 in this example) is the factoring fee.
You're not borrowing money — you're selling a receivable (money owed to you) at a discount in exchange for getting paid now instead of later.
There's no debt, no interest, and no repayment schedule.
How Freight Factoring Works — Step by Step You deliver a load — Complete the delivery and get your Bill of Lading (BOL) signed by the receiver as proof of delivery.
Submit the invoice — Send the invoice, signed BOL, and rate confirmation to your factoring company.
Most factoring companies have an app or online portal where you upload documents — some accept photos from your phone.
Factoring company verifies the load — The factor confirms the load was delivered by checking the documentation and verifying the broker's creditworthiness.
You receive the advance — The factoring company deposits the advance amount into your bank account.
Typical advances are 90-98% of the invoice .
Same-day or next-day funding is standard.
Some factors offer same-day ACH or fuel card advances within hours.
Factoring company collects from the broker — The factor takes over collection.
They invoice the broker, follow up on payment, and handle any disputes.
You don't have to chase down payments.
You receive the reserve (minus the fee) — When the broker pays the factoring company, you receive the remaining percentage (the "reserve") minus the factoring fee.
For example, if the advance was 95% and the fee is 3%, you get the remaining 2% when the broker pays.
Non-Recourse Factoring This is the most important distinction in freight factoring, and the one most often misunderstood: Recourse Factoring With recourse factoring , if the broker doesn't pay the factoring company, you are responsible for repaying the advance.
The factoring company will come back to you and require you to return the money they advanced.
This is the more common type and typically has lower factoring rates because the factoring company's risk is lower.
Typical rates: 1-3% of the invoice amount Non-Recourse Factoring With non-recourse factoring , if the broker doesn't pay, the.
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