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By Tiffany Verbeck Updated on November 30, 2021

Keep on Trucking With Freight Factoring

Freight factoring allows carriers to sell unpaid invoices for immediate cash. Learn what it is and how it can help your transportation business.

What Is Freight Factoring?

Freight factoring, also known as trucking factoring or transportation factoring, isn’t as complicated as it sounds.

Consider freight factoring’s definition: It’s a financial service that provides trucking or other transportation companies with upfront cash so they don’t have to wait for their customers to pay their invoices.

Freight brokers use factoring to help transportation companies secure immediate cash to pay for fuel or investments in their business. Some freight factoring companies pay you for most of the total receivables up-front and then the rest once the bill is paid. Others choose to give you a small percentage down and the rest once they collect the final payment.

When trucking companies factor their invoices, the burden of chasing down the customer for the late payment is taken care of by another party. That can be reason enough for some business owners to pay a fee for factoring services.

How Does Freight Factoring Work?

With trucking invoice factoring, a company sells its accounts receivables to a freight factoring company for a fee, which is typically 3% to 10% or more of the total receivable amount and gets taken out of the money the factor sends to the company, according to FreightWaves, which operates a logistics news website.

To avoid paying this factoring fee, some business owners build the expense into their invoices. Before creating an invoice, they determine what the factoring fee will be and add that amount to what the customer will pay.

To factor a freight invoice, follow these steps:

Send the Freight Bill

After completing the delivery of your load, send the freight bill to the factoring company, which may require you to give them proof of delivery and a rate sheet.

Receive the Funds

The factoring company verifies the invoice and sends you a percentage of the total bill as a cash advance as outlined in the agreement. Typically, you’ll receive the funds the same day and can be delivered via wire, check, automated-clearing-house payment or a fuel card account.

Stop Worrying

You receive a payment for your invoices, but the responsibility for the invoice transfers to the factoring company. You’re no longer in charge of tracking down that money, so you can focus on more important tasks, like getting your trucks on the road.

The best part about trucking factoring? You typically don’t have to sign a long-term contract, pay introductory fees, or fulfill any sort of minimum requirements, like a minimum volume. Plus, your company’s credit score doesn’t affect your eligibility for factoring.

  • Who Uses Freight Factoring Companies?

    • Freight companies with customers that take a long time to pay invoices or don’t have enough cash on hand to effectively invest into their business’s development.
    • Anyone who has been late paying vendors because of a lack of invoice payment. Or anyone using their most precious resource — time — making phone calls to get invoices paid.

There are two types of freight factoring: recourse factoring and nonrecourse factoring.

Freight Factoring Services

There are two types of freight factoring: recourse factoring and nonrecourse factoring. One type leaves you responsible for failed payments while the other places the responsibility with the factoring company.

The type of factoring you choose depends on your personal preference for risk versus cost. You must weigh the cost of the fees against the risk that your customer won’t pay. Keep in mind that a factoring company runs a credit check against your customers to ensure they are likely to pay and in good financial standing.

Recourse factoring

With recourse factoring, you’re responsible if the customer goes bankrupt and can’t pay the invoice. This type of factoring typically brings lower fees, which could be useful for someone aiming to keep their costs down. Going with recourse factoring depends on how much faith you have in your customers to pay their invoices.

Nonrecourse factoring

With nonrecourse factoring, the lending company takes responsibility for the payment of the invoice if the customer goes bankrupt — meaning your business has no liability with any uncollected invoices. If you prefer some peace of mind, nonrecourse factoring could be right for you.

Before deciding whether to go with recourse or nonrecourse factoring, be sure to understand what the fine print means for the type you are signing up for.

Other services

Some companies offer additional freight factoring services, such as an uploadable fuel card, fuel discounts and free credit checks on customers.

Trucking Factoring Rates

The rates you receive for your factor depends on multiple variables related to the amount of risk the factoring company is taking. Conditions like choosing a recourse or a nonrecourse factor, the likelihood of the customer repaying the loan and the volume of your load will affect your rate.

On average, trucking factoring rates can fall between 2% and 5% for smaller trucking companies. Larger companies may pay between 0.5% and 5% on average.

On average, trucking factoring rates can fall between 2% and 5% for smaller trucking companies.

Top Freight Factoring Companies

There are many ways to find the top factoring companies for freight brokers.

For example, you could complete the factor search form created by the International Factoring Association (IFA), a trade group serving commercial finance companies. All you do is fill out basic information about your company, such as your specialty, the funding you’re searching for, your average monthly invoicing amount and a brief description of your company. Then, the IFA sends your information only to its vetted member companies that match your criteria. All information is confidential.

Although the IFA is a great in-depth search, it’s also helpful to get a general overview of the options available. Here are 3 freight factoring companies that stand out among the crowd.

TBS Factoring

TBS Factoring Service is a company specifically dedicated to transportation factoring. Most factoring companies also lend to other industries, but working with a niche company focused on your industry can provide a lot of advantages. A company that specializes in transportation factoring will understand your freight needs on a deeper level.

TBS touts factoring rates as low as 1.25%. TBS offers recourse and nonrecourse factoring. The company states you’ll receive 100% of your money up-front with nonrecourse factoring. Financing through TBS can be quick and easy. The company also features perks such as a fuel card and up to a 50% advance on loads.


Paragon Financial Group works with many different industries but provides transportation-specific factoring as a service. Even though the company serves more than one industry, it is well qualified — with 25 years of experience — to work with freight businesses.

Paragon’s rates start at 2% and they offer up to 90% of your invoice in advance. The company performs credit checks on potential customers to detect red flags before they become a problem for your business.


Online lender BlueVine also works with various industries. Rates start at 0.25% a week and they approve within 24 hours. BlueVine may be a good option for freight companies with large invoices because the lender can provide factoring lines of up to $5 million.

However, BlueVine is more strict with who they will work with. Unlike some other options, BlueVine checks credit scores, though the requirement is low (530 or higher). You need at least $100,000 in annual revenue and have been operating the business for at least 3 months.

Do your research to find a factoring company that is the right fit for growing your supply of cash on hand. Soon enough, you’ll be on your way to increasing your profits and growing your business.

A Final Word on Freight and Trucking Factoring

If you find yourself continuously chasing down customers to pay their invoices, you might be wasting your energy. Instead, you could offload a lot of that work to a factoring company.

As long as you understand the type of factoring you are signing up for — and the reliability of the company doing the factoring — freight factoring could make your business operate more smoothly and give you access to immediate cash.

Tiffany Verbeck is a personal finance expert. She uses her storytelling skills gained from a master’s degree in writing to run a writing business focused on helping people make and manage their money. She writes two blogs, one focused on personal finance and another that's a resource hub for rural creative types. She has been published in The Financial Diet, The Write Life, Matador Network and other online publications.
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