How Does Freight Factoring Work? (And When It's Worth It)
Freight factoring is when an owner-operator sells their unpaid freight invoices to a factoring company at a small discount in exchange for getting paid right away — usually within a day — instead of waiting 30 to 60 days for the broker to pay. The factoring company then collects from the broker. It's a cash-flow tool: you trade a small percentage of the invoice for immediate money to cover fuel, payments, and expenses.
How factoring works, step by step
- You haul a load and invoice the broker as usual.
- Instead of waiting for payment, you submit the invoice to your factoring company.
- The factoring company pays you most of the invoice amount quickly — often the same or next day.
- The factoring company collects the full payment from the broker on their normal terms.
- They keep a small fee (their percentage) for fronting you the cash.
What does factoring cost?
Factoring companies charge a percentage of each invoice — the "factoring rate." The exact rate depends on your volume, the brokers you work with, and whether it's recourse or non-recourse factoring. It's a real cost, so the question is whether faster cash is worth the fee for your situation.
Recourse vs. non-recourse factoring
- Recourse factoring is usually cheaper, but if the broker never pays, you're on the hook to buy the invoice back.
- Non-recourse factoring costs a bit more but shifts more of the non-payment risk to the factoring company (within their terms).
Read the terms carefully — "non-recourse" doesn't always mean you're covered in every scenario.
When factoring is worth it
Factoring makes sense when waiting 30–60 days for payment would starve your cash flow — which is common for new authorities and single-truck operators who need money for fuel and payments now, not next month. If you have enough cash reserves to wait for broker payment, you might skip the fee. It's a trade between cost and cash-flow certainty.
Factoring and dispatch work together
Factoring handles your cash flow; dispatch handles your freight and rates. Many owner-operators use both. Through our partner network, we can point you toward factoring partners — and if you're a factoring company, you can partner with us to refer carriers.
Want help getting set up to run profitably from day one? Call a Dexent dispatcher.