Factoring is one of the oldest financial products there is, and in trucking it does exactly one thing: it removes the gap between delivering a load and being paid for it.
The problem it solves
You deliver on Monday. The broker's terms are net 30, and in practice they pay on day 38. Meanwhile your fuel was bought on Sunday, your driver is paid on Friday, and your truck payment does not care about anyone's terms.
A growing carrier feels this worse than a shrinking one. Every additional truck you put on the road increases the amount of your own cash tied up in unpaid invoices. Plenty of profitable fleets have run out of money while their books said they were doing well.
How the money moves
Four steps, and none of them involve debt:
- You deliver the load and send the factor the rate confirmation, BOL and signed POD.
- The factor buys that invoice from you and funds you — with us, the same business day.
- The factor invoices the broker and waits out the 30 to 60 days.
- The broker pays the factor. Done.
You are selling an asset you already own, not borrowing against it. There is no debt on your balance sheet and no monthly repayment. That distinction also explains why a thin credit file rarely blocks approval: the factor is underwriting the broker's ability to pay, not yours.
What it actually costs
The headline number is the factoring rate — a percentage of the invoice face value. On a $2,000 load at 2%, the fee is $40 and you receive $1,960.
The headline number is also where most carriers get taken. A rate is only the true cost if nothing else is deducted, and at a lot of factors plenty else is: reserves held back until the broker pays, ACH or wire fees per funding, per-invoice processing fees, monthly minimums, credit-check charges, and termination penalties. Every one of those is real money that never appears in the advertised rate.
The only rate worth comparing is the all-in one. Ask any factor to quote you the total deduction on a $2,000 invoice, in dollars, and watch how the conversation changes.
When it is worth it
- You are growing. Every new truck ties up more cash in receivables. Factoring is what lets you add the truck before the money comes back.
- Your margin can carry it. If a 2% fee is smaller than what waiting 40 days costs you in missed loads, deadhead, or a maxed fuel card, factoring is profitable, not expensive.
- You are spending nights on paperwork. Collections and invoicing are included at a real factor. That time has a value.
- You are new. A fresh authority with no credit history can still get funded, because the underwriting is on your brokers.
When it is not
Honestly:
- You already have the cash cushion. If you can comfortably float 45 days of operating costs and you are not trying to grow, you are paying for a problem you do not have.
- Your customers pay fast. A shipper on net 10 is not worth factoring.
- The rate is bigger than your margin. Factoring cannot fix a lane that does not pay. It accelerates cash; it does not create it.
A factor who will not say the above out loud is selling, not advising.
Recourse vs. Non-Recourse