Factoring: Factoring is a financing arrangement where a carrier sells its unpaid freight invoices to a factoring company at a discount and receives most of the money within a day or two instead of waiting for the broker or shipper to pay.
Why it matters to owner operators
Brokers often pay in 30 days or more, while fuel, insurance and repairs are due now. Factoring smooths cash flow, but the fee reduces what you keep on each load, so compare rates, reserve terms and contract length before you sign.
Example
A carrier delivers a $2,500 load and submits the invoice with the rate confirmation and proof of delivery. The factor advances most of the amount right away and sends the rest, minus its fee, after the broker pays.
Recourse vs non-recourse factoring
With recourse factoring, if the broker never pays, you have to buy the invoice back or replace it. With non-recourse factoring, the factor takes the loss if the broker goes out of business, but usually not if payment is held up by a dispute over the load. Non-recourse plans tend to cost more, so read what “non-recourse” actually covers.
What to compare between factoring companies
- The fee percentage and whether it rises the longer the invoice is unpaid
- Extra fees: ACH or wire, monthly minimums, setup or termination charges
- Contract length, and whether you must factor every load or can pick which ones
- Fuel advances and free broker credit checks
Factoring works alongside your dispatcher: we send the rate confirmation and signed BOL so loads get funded fast. See our dispatch services.
Related terms
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