How Freight Factoring Works for Owner Operators

The basic idea

Factoring means selling your unpaid freight invoices to a factoring company. They advance you most of the invoice value quickly, then collect from the broker or shipper. When the broker pays, you receive the remaining balance minus the factoring fee.

Step by step

1. You deliver the load and collect your proof of delivery.
2. You send the invoice and paperwork to the factoring company.
3. They advance a large share of the invoice, often within one business day. The exact advance varies by company.
4. The factor collects payment from the broker on the original terms.
5. You receive the reserve (the part held back) minus the fee.

Costs and terms to compare

• Fee rate. Usually a percentage of the invoice. Ask whether it changes with the number of days the invoice stays open.
• Recourse or non-recourse. With recourse, you may have to buy back an invoice the broker never pays. Non-recourse shifts some of that risk to the factor, often with conditions.
• Contract length and minimums. Look for monthly volume requirements, termination fees and long lock-in periods.
• Extra fees. Ask about wire or ACH fees, fuel card tie-ins, and fees for credit checks or paperwork.
• Notice of assignment. Your brokers are told to pay the factor. Make sure that process is clean.

Is factoring right for you?

Factoring helps when cash flow is tight, for example when you have fuel and repair bills due while waiting on Net 30 payments. It costs money, so owner operators with strong cash reserves sometimes use quick pay on selected loads only. Compare the true cost with your break-even rate before committing.

How dispatch fits in

A dispatcher does not replace factoring; they work alongside it. Nexloads books the load and manages paperwork so your invoices are ready to submit. See our pricing or the factoring checklist.

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