Compare factoring companies on the total cost of a typical load and on the contract terms, not on the headline rate. A 3% fee on a $3,000 load paid in 35 days, plus a $15 same-day transfer, costs $105. If you factor $40,000 a month, that $15 alone is about $200 a month, which is why two offers at 3% can end up hundreds of dollars apart. A long contract with an exit fee can cost more than any of that.
This guide is for owner-operators and small fleets who are choosing a factoring company for the first time or thinking about switching. It does not name or rank companies. It gives you the questions to ask each one and what a straight answer should include, so you can put any two offers side by side.
What a factoring company does for a trucking business
A factoring company buys your freight invoices. You deliver the load, send the invoice and the signed bill of lading, and the factor pays you an advance, usually the same day or the next. The broker or shipper then pays the factor. When it does, the factor releases the reserve, which is the part of the invoice it held back, minus its fee.
What you pay for is cash today instead of waiting for the broker. Five terms come up in every offer:
- Advance rate: the share of the invoice paid to you upfront, for example 95%.
- Reserve: the rest of the invoice, held until the broker pays, then released minus the fee.
- Flat or tiered rate: a flat rate is the same whatever the payment days; a tiered rate starts lower and rises for every block of days the invoice stays unpaid, for example 2% for 30 days plus 0.5% per extra 10 days.
- Recourse or non-recourse: with recourse, you buy back an invoice the broker never pays; with non-recourse, the factor takes that loss if the broker cannot pay. Our recourse vs non-recourse guide shows when the higher price is worth it.
- APR: the cost turned into a yearly rate, so a fee for a few weeks can be compared with a loan or a credit line.
12 questions to ask every factoring company
Ask them in writing and keep the answers. If a company will not put an answer in writing, treat that as a warning sign.
| # | Question | Why it matters | A clear answer includes |
|---|---|---|---|
| 1 | What is the total cost of one typical invoice? | The rate is one line. Transfers, processing and credit checks add up. | A worked example in dollars with every fee, for your average load and payment days. |
| 2 | Is the rate flat or tiered by days? | With a tiered rate, slow brokers push loads into a more expensive block. | The full tier table and how the days are counted (from funding or from the invoice date). |
| 3 | Recourse or non-recourse, and what is covered? | Non-recourse usually covers only a broker that cannot pay, not disputes. | The definition of a covered loss and the number of days before a buy-back. |
| 4 | What is the advance rate and when is the reserve paid? | The reserve is your money; slow releases hurt cash flow. | A percentage and a release date or trigger, in writing. |
| 5 | Do I have to factor every load? | Full factoring can tie up brokers who already pay you fast. | Which invoices are covered by the contract and which are optional. |
| 6 | Is there a monthly minimum? | A slow month can turn into a penalty. | No minimum, or a minimum and the exact fee if you miss it. |
| 7 | How long is the contract, and how do I leave? | Long terms and automatic renewal lock you in. | The term, the notice period, the exit fee and the steps to get a release letter. |
| 8 | How do you approve brokers? | Loads for brokers the factor will not approve may not be funded, or only with recourse. | How the credit check works and how fast you get an answer before you book a load. |
| 9 | How fast is funding, and what does it cost? | Same-day transfers often carry a fee; next-day may be free. | Cut-off times and the price of each transfer method. |
| 10 | Do you offer fuel advances, and on what terms? | An advance before delivery can have its own fee and repayment rules. | The fee, the cap per load and what happens if the load is cancelled. |
| 11 | Who contacts my brokers, and how? | Brokers you rely on will deal with the factor about every late payment. | Who sends the notice of assignment and how collections are handled. |
| 12 | What happens if a broker disputes a load? | Disputes are where most contracts send the risk back to you. | The process, the deadline to respond and any fees while the dispute is open. |
Fuel advances: useful, but read the terms
A fuel advance is money paid against a load before you deliver it, often to the fuel desk or a fuel card. It solves a real problem for a new carrier, but it is a second product inside the contract. Check whether it has its own fee, how much of the load it can cover, how it is repaid when you submit the invoice, and what happens if the load is cancelled or rejected. If a factor offers fuel discounts, ask whether they depend on factoring every load.
The notice to your brokers
When you start factoring, your brokers receive a notice of assignment: a letter telling them to pay the factor from now on. The Uniform Commercial Code, the commercial law adopted by every state, gives that letter its force: a broker can keep paying you until it receives the notice, and after that only a payment to the factor counts (UCC 9-406). Two practical points follow:
- If a broker pays you by mistake after the notice, that money belongs to the factor, and most contracts require you to hand it over at once.
- When you leave, your brokers need a release letter: a letter from the old factor saying it no longer owns your future invoices. Ask for it in your notice to leave. Without it, payments can be held or sent to the wrong place.
Contract length, exit fees and how to leave
The contract term deserves as much attention as the rate. A one-year contract that renews automatically unless you give 60 or 90 days' notice can keep you with a factor long after a better offer appears. Look for:
- Term and renewal: how long, whether it renews on its own, and the notice window to stop it.
- Exit fee: a flat amount or a formula, and whether it applies if the factor changes its prices.
- Open invoices: how unpaid invoices and recourse are settled when you leave.
- The UCC filing: factors usually file a financing statement, a public record in your state that tells other lenders your invoices are taken. To clear it, the factor files a termination statement. Once the contract has ended and your brokers have paid the invoices the factor bought, you can send a written demand, and the factor then has 20 days to send you or file that termination (UCC 9-513). A new factor or a bank will check the record before working with you.
Red flags worth walking away from
- No written price sheet, or a quote that only gives a rate without the fees.
- Pressure to sign the same day, or a contract you cannot take away to read.
- An exit fee you cannot calculate from the contract.
- "Non-recourse" with no written definition of what is covered.
- A requirement to factor every load from every customer, when you only need help with slow payers.
- Charges on every invoice for basic steps, such as entering the invoice or sending it to the broker, on top of the rate.
How to compare two offers side by side
Take your typical load: the invoice amount, the days your broker usually takes to pay and the transfer you would use. Put each offer through the freight factoring cost calculator with the same numbers. You get the dollars per load and an estimated APR for each, which makes a flat 3% and a tiered 2% plus 0.5% per 10 days comparable. Then compare the contract terms from the 12 questions, because the cheapest rate with a two-year lock-in may not be the cheapest deal.
Whatever you choose, check each new broker before you haul for it. Every licensed freight broker must keep a $75,000 surety bond or trust fund (49 CFR 387.307), and its registration and bond show on the FMCSA's public Licensing and Insurance search.
Questions about factoring companies for trucking
How do factoring companies for trucking work?
You deliver the load, send the factor the invoice and the signed bill of lading, and the factor pays you most of the invoice the same day or the next. Your broker then pays the factor instead of you. When the broker pays, the factor releases the rest of the invoice, minus its fee.
How do I choose a factoring company for my trucking business?
Compare offers on the total cost per invoice and the estimated APR, not on the headline rate. Then check four things in the contract: what recourse means and after how many days, the fees per load, the minimum term and the exit fee, and how the factor handles a broker it has not approved.
Do I have to factor all my loads?
It depends on the contract. Some factors require every invoice, some every invoice from the brokers you factor, and some let you choose load by load (spot factoring, usually at a higher rate). Ask before you sign, because a full-factoring clause also decides what you can do with your best-paying brokers.
Can I switch factoring companies?
Yes, but plan it. Check the notice period and exit fee in your contract, settle any open recourse, ask the old factor for a release letter for your brokers, and make sure its UCC filing on your invoices is terminated. Under UCC 9-513, once the contract has ended and your brokers have paid the invoices it bought, the factor has 20 days after your written demand to send or file the termination.
Is freight factoring worth it for a new authority?
Often it is the only way a new carrier can wait 30 to 45 days for broker payments while paying fuel every week. The useful test is the cost per load against your profit per load: if the factoring cost eats most of the margin, the lanes or the rates are the problem, not the cash flow.
Sources
- Notice to the broker (account debtor): UCC 9-406. Cornell Law School.
- Termination of the filing after the invoices are paid: UCC 9-513(c). Cornell Law School.
- Broker surety bond or trust fund of $75,000: 49 CFR 387.307. eCFR.
- Checked on 8 November 2026. No factoring company was consulted, named or paid for this guide.