How freight factoring works for a small carrier: advance rate, fee, reserve, recourse vs non-recourse, and when factoring beats waiting on net-30 broker pay.
A broker pays you when the invoice is due, which is usually some number of days after they receive the invoice and proof of delivery. Fuel, the truck payment and the driver are due now. Factoring closes that gap: you sell the invoice to a factoring company, get most of the money within a day or two, and the factor collects from the broker. The service costs a fee. Whether that fee is worth it depends on your cash, your brokers and how much work you want to do yourself.
This guide explains the structure every factoring agreement has, without quoting anyone’s rates (they change, and yours will depend on your volume and your brokers). Put your own numbers into the free factoring fee calculator to see what a given offer costs against direct billing.
How net terms work
“Net 30” means the full amount is due 30 days after the invoice date. In freight, the clock usually starts when the broker has the invoice and the signed POD, so a slow POD adds days. Some brokers offer “quick pay”: a discount off the rate in exchange for paying within a few days. Quick pay is a form of factoring where the broker is the factor; compare its cost the same way.
The parts of a factoring deal
Advance rate. The share of the invoice the factor pays you up front, typically expressed as a percentage of the invoice value. The rest is the reserve.
Fee. What the factor keeps, usually a percentage of the invoice. Some factors charge a flat rate regardless of how long the broker takes; others charge a tiered rate that rises the longer the invoice stays unpaid. A tiered fee punishes slow brokers; a flat fee is easier to budget.
Reserve. The part not advanced. When the broker pays the factor, the factor releases the reserve to you minus the fee. If the fee is bigger than the reserve, you owe the difference.
Recourse vs non-recourse. With recourse factoring, if the broker never pays, the factor charges the invoice back to you after a set period. With non-recourse, the factor eats the loss, but only for the reasons the contract names, usually the broker’s insolvency. Disputes about the freight, missing paperwork or a broker that simply stops answering are typically still your problem. Non-recourse costs more and the fine print decides what it covers.
Try it on your own trucks
Every plan includes every feature. Start a 30-day free trial and set up your first load, driver and settlement.
Notice of assignment. The factor tells your brokers to pay the factor, not you. From then on every invoice to that broker goes through the factor, and a broker who pays you by mistake creates a mess.
Term and minimums. Many agreements run for a year or more, renew automatically, and require a minimum monthly volume or charge a fee for falling short. Read the termination clause before you sign.
Other fees. Wire or same-day funding fees, broker credit check fees, monthly minimums, early termination fees. These change the real cost more than the headline rate.
A worked example
A $3,000 invoice, a 90% advance and a 3% flat fee, all made-up numbers for illustration. You receive $2,700 within a day or two. The factor collects $3,000 from the broker 35 days later, keeps $90 and releases the remaining $210 to you. The load earned you $2,910 in total; factoring cost $90, or 3% of the rate, for having $2,700 about five weeks early.
Example factoring cash flow on a $3,000 invoice
Amount
When
Invoice
$3,000
Day 0
Advance (90%)
$2,700
Day 1–2
Broker pays factor
$3,000
Day 35
Fee (3%)
−$90
Day 35
Reserve released
$210
Day 35–36
Total received
$2,910
The useful comparison is against what the cash would do for you. If $2,700 five weeks early lets you take another load instead of sitting, the fee is cheap. If you have a month of operating cash in the bank, the fee is a straight 3% cut in your rate. The calculator shows the effective annual rate of an advance so you can compare it with a line of credit or a fuel card’s terms.
How a tiered fee changes the picture
Take the same $3,000 invoice with a tiered fee instead: say 2% if the broker pays within 30 days, 3% within 60 and 4% after that (again, invented numbers). A broker who pays on day 25 costs $60; the same broker paying on day 45 costs $90; a broker who drags to day 70 costs $120, double the fast payer, for the same load and the same work. Under a tiered schedule the broker’s payment habits become part of the rate, which is one reason factors share broker credit information with their clients: a slow broker costs them collection effort and costs you fee tiers. If most of your brokers pay fast, tiered can be cheaper than flat; if you cannot predict them, flat is safer.
Leaving a factor
Switching factors or going back to direct billing is harder than signing up, because every broker has a notice of assignment on file and the old factor has to release it. Expect a notice period in the agreement, a buyout of any open invoices the old factor has advanced, and a few weeks of brokers paying the wrong party. Plan the switch for a slow period, settle every open invoice first, and send each broker the release letter and your new remit-to instructions on the same day.
When factoring makes sense
A new authority. No cash buffer, no payment history with brokers, and brokers’ payment terms are at their slowest. Most new carriers factor for the first year and reconsider once they have reserves.
Fast growth. Every added truck needs weeks of operating cash before its first invoices pay.
You do not want to run collections. Chasing brokers, checking credit before you book, and sending reminders is work. A factor does it and most will tell you before you book whether a broker is good for the money.
When billing brokers yourself is better
You have enough cash to cover roughly two months of operating costs without the receivables.
Your brokers are a small, known set that pays reliably, or you run dedicated freight for a shipper on agreed terms.
Your margin is thin enough that the fee is the difference between a profit and a loss on the load.
You want to keep the broker relationship direct, with no notice of assignment in the middle.
Questions to ask before you sign
Is the fee flat or tiered by days outstanding, and what are the tiers?
Recourse or non-recourse, and exactly which situations non-recourse covers?
Is there a monthly minimum, a term, automatic renewal, or an early termination fee?
Do I have to factor every invoice, or can I pick which ones?
What does it cost to fund same-day, and what does a broker credit check cost?
How and when is the reserve released, and can I see each invoice’s status online?
Either way, the packet is the same
A broker and a factor want the same files to release money: the rate confirmation, the signed BOL, the proof of delivery, and the invoice. The faster a clean packet goes out after delivery, the sooner the clock starts. freightline builds that packet from the load: pick We invoice brokers ourselves or Through a factoring company in settings, and after delivery you either email the invoice with the rate con and POD attached, or send the whole packet to your factor’s submissions address in one click (see invoicing and factoring and the how-to).
Send your next factoring packet from the load instead of from your inbox. The 30-day trial needs no card, and every plan includes every feature.
Common questions
Is the factoring fee charged on the whole invoice or on the advance?
Usually on the whole invoice value. Check the agreement; it changes the math on a low advance rate.
What happens if the broker pays me directly after the notice of assignment?
You owe that money to the factor, and most agreements treat repeated misdirected payments as a breach. Forward it immediately and tell the broker to update their records.
Does non-recourse mean I never lose money on a bad broker?
No. It covers the situations the contract names, typically the broker's insolvency. Freight disputes, short pays and missing paperwork usually come back to you.
Can I factor some loads and bill others myself?
Some factors allow it, many require all invoices from a given broker once the notice of assignment is sent. Ask before signing.
Does freightline factor invoices?
No. It sends the invoice or the factoring packet from the load to your broker or your factoring company and tracks the payment status. The factoring agreement is between you and the factor.