Factoring
Factoring is selling your unpaid freight invoices to a third-party company for immediate cash (minus a fee), so you don't have to wait 30–60 days for brokers to pay.
What you actually need to know
Most freight brokers pay carriers on net-30, net-45, or net-60 terms — meaning the broker pays you 30 to 60 days after you deliver the load. New owner-operators usually can't wait that long; fuel, insurance, and truck payments are due now.
A factoring company solves that. You deliver the load, send the broker's invoice to the factor, and the factor pays you 95–98% of the invoice within 24–48 hours. The factor then collects the full invoice amount from the broker on the original 30/45/60-day timeline and keeps the 2–5% as their fee.
Two main factoring models:
- Recourse factoring: Cheaper (1–3%), but if the broker doesn't pay, you're on the hook to repay the factor.
- Non-recourse factoring: More expensive (3–5%), but the factor absorbs the loss if the broker defaults.
Most new owner-operators start with non-recourse. The peace of mind is worth the extra 1–2%.
Common mistakes / confusions
- Factoring is not a loan. You're selling an asset (the invoice), not borrowing money.
- Factoring fees are usually charged per invoice, not as an annual rate — but if you factor every load, that 3% adds up to a meaningful share of revenue.
- Some factoring contracts lock you in for 12 months or include early-termination penalties. Read the contract before signing.
Related terms
Where to go next
TruckStart is an educational tool, not a law firm, accounting firm, insurance agency, freight broker, or filing service. Always verify current requirements directly with FMCSA, your state, the IRS, and qualified professionals before making business decisions.