How Freight Factoring Actually Works

6 min read · Free guide from Southeast Freight Dispatch

Brokers pay in 30 days. Your fuel bill is due now. Factoring bridges the gap: you sell your invoices to a factoring company, they advance you most of the money within 24 hours, and they collect from the broker.

How it works, step by step

1. You deliver the load and send the signed BOL + invoice to your factor.
2. The factor verifies the invoice with the broker (usually same day).
3. You get 90–97% advanced, often within 24 hours.
4. The broker pays the factor in 30 days; you get the remaining reserve minus the fee.

What it costs

Typical: 1–3% of the invoice. A $3,000 load at 2% costs you $60 to get paid tomorrow instead of next month. Rates depend on volume, broker credit quality, and whether the contract is recourse or non-recourse.

Recourse vs non-recourse

Recourse (cheaper): if the broker doesn't pay, the factor charges it back to you. Non-recourse (pricier): the factor eats the loss if the broker goes bankrupt — but read the fine print, because "non-recourse" rarely covers disputes.

Red flags in factoring contracts

• Long lock-in terms (12+ months) with expensive buyouts.
• Monthly minimum volume fees — brutal in slow months.
• Hidden fees: invoice processing, wire fees, "account maintenance."
• UCC blanket liens that make switching factors a legal fight.

How to pick one

Get 3 quotes. Ask for the all-in cost per $10,000 factored, the contract length, and the release terms. Talk to other carriers using them — not the sales rep's reference list. And never sign the first offer on the call.

The free option

We set our carriers up with factoring at no setup cost — and we only recommend factors we'd trust with our own money. It is part of the full office.

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