Freight factoring is invoice factoring designed for trucking. A motor carrier sells its invoices for delivered loads to a factor and receives cash quickly, instead of waiting for the shipper or freight broker to pay.
How it works in factoring
The typical flow:
- A carrier hauls a load booked through a freight broker or directly with a shipper.
- After delivery, the carrier sends the factor the rate confirmation, signed bill of lading or proof of delivery, and the invoice.
- The factor checks the customer's credit and payment history and verifies the load.
- The factor funds the advance, often the same or next business day.
- The freight broker or shipper pays the factor.
Freight factoring has some industry-specific features:
- Credit checks on freight brokers and shippers before a load is booked, helping carriers avoid slow or unreliable payers
- Fuel advances on loads in progress
- Back-office services such as invoicing and collections
- Operating authority checks, since factors confirm the carrier's USDOT and MC registration with FMCSA
Owner-operators and small fleets use freight factoring heavily because fuel, insurance and maintenance must be paid long before customers pay on 30-day or longer terms.
What to check
- Recourse versus non-recourse terms, and what non-recourse actually covers
- Fees beyond the discount, such as fuel card, ACH or same-day payment charges
- Whether you must factor all loads or can choose
- Contract length and termination notice
Comparing the all-in cost with freight broker quick-pay programs is worthwhile for carriers who use only a few customers.