What is Freight Bill Factoring?

Freight bill factoring is a form of business financing. It enables carriers and brokers to finance slow-paying freight bills.

It works by providing you with an immediate advance on your invoices. The factoring company holds the invoice and you get working capital to run your business.

In this article, we discuss:

  1. How freight factoring works
  2. Factoring rates
  3. Recourse vs non-recourse
  4. Is factoring right for you?

The problem: Cash flow

Running a transportation company – either a carrier or freight broker – can be financially rewarding. However, it can also be very challenging.

One of the major challenges that company owners encounter is slow-paying clients. Moving loads from shippers who take up to 60 days to pay can drain you financially.

You are left in a position where you need pay for drivers, fuel, and repairs – while waiting for shippers to pay. Few companies have the financial resources to meet that challenge and grow at the same time.

Freight factoring solves this problem

You can solve this problem by using freight bill factoring. It finances your open freight bills and provides immediate funding. Factoring offers many of the benefits of quick-pays, without requiring shippers to pay sooner. You no longer need to ask your shippers for quick-pays. Instead, the factoring line acts as a quick-pay that you can use on your qualified clients.

How does freight factoring work?

There are two ways to structure a transaction. The most common method is to finance the freight bill with two installments. The first installment covers 90% of the freight bill. It is funded as soon as you deliver the load and invoice your client. The second installment covers the remaining 10%, less the finance fee. It is advanced once your shipper pays its bill in full.

Small carriers may qualify for single-installment transactions. This method provides more money upfront, at a slightly higher (per dollar) cost. The advance can be as high as 97% of the invoice. The part that is not advanced is kept by the factor as the fee.


Factoring fees are calculated using a combination of three parameters. They are: your sales volume, transaction length, and the creditworthiness of your clients.

Fees range from 1.15% to 3% per 30 days. Costs can be prorated and arranged to match your needs (e.g., flat fee, weekly, etc.). The factoring line can be established in as few as three days provided you have all your documentation in order.

Additional services

We offer fuel cards and fuel advances to qualified carriers. Both of these solutions improve your cash flow and allow you more control over your funds.


The qualification requirements for freight bill factoring are simple. Your transportation company must:

  1. Be a carrier or freight broker
  2. Have all the proper documentation, authorities, and licenses
  3. Work with creditworthy shippers/commercial clients
  4. Have freight bills that are free of liens


Factoring your freight bills has many advantages for truckers and freight brokers. They include:

1. Take on more loads: Having access to financing and improved cash flow allows you to take on more loads. You are no longer restricted by your funds.

2. Improve customer quality: Factoring companies check the commercial creditworthiness of your shippers/clients. They help you avoid those that could become problems. This support allows you to focus only on your best potential clients.

3. Easy increases: Your customers can be approved quickly. Most line increases can be approved the same day. The size of your line is based on your ability to sign on good customers and deliver good service.

Recourse vs non-recourse

Factoring transactions can either be recourse or non-recourse transactions. In a recourse transaction, the factor can return the invoice to you if it is not paid within 90 days.

In a non-recourse transaction, the factoring company takes the loss if your shipper goes bankrupt. If the invoice is not paid for any other reason, it is usually returned to you after 90 days.

Contrary to what you would expect, non-recourse factoring is not necessarily better than recourse. Factors will not finance any invoices from questionable shippers regardless of recourse. However, non-recourse plans have a higher cost to compensate for the risk.

Keep in mind that non-recourse plans do offer protection for some circumstances. They can protect you against unexpected client bankruptcies. Learn more about recourse vs non-recourse.

Is factoring right for you?

Freight factoring may be right for your transportation company if:

  1. Your clients take up to 60 days to pay
  2. You cannot afford to wait that long for payment
  3. You need to pay business expenses

Want a quote?

We are a leading freight factoring company and can get you funded quickly. Our plans have high advances at low rates. For an instant quote, fill out this form or call (877) 300 3258 to speak with an expert.