Freight Factoring Companies: How to Choose One
Freight factoring companies buy your unpaid broker invoices and advance most of the value within about a day, minus a fee. Compare them on recourse terms, total fees, reserve release, contract length and termination, and whether you must factor every load.
By TruckerStack Editorial, AK Digital Marketing LLC · Checked against official sources on 2026-11-04 · Editorial policy · Not insurance, legal or financial advice.
How it works
- You deliver and send the factor the rate confirmation, BOL and invoice.
- The factor verifies and advances a percentage; the rest is held as a reserve.
- Your customer pays the factor (a notice of assignment redirects payment, see UCC §9-406).
- The factor releases the reserve minus its fee.
Deep dive: how freight factoring works.
Comparison criteria
| Term | What to ask |
|---|---|
| Recourse | Who absorbs loss if a broker never pays, and after how many days? |
| Advance & reserve | What % is advanced; when is the reserve released? |
| Fees | Discount rate plus ACH, wire, fuel-advance, invoice, minimum-volume and termination fees. |
| Volume | Must you factor all invoices or can you spot factor? |
| Contract | Term, auto-renewal, notice period and UCC lien release. |
| Credit checks | Free broker credit checks before you book? |
Red flags
- Non-recourse that only covers broker bankruptcy, not slow pay.
- Long auto-renewing terms with buyout fees.
- Blanket UCC lien on all assets, not just receivables.
- Fees not shown in writing before signing.
Always check the broker first with our DOT/MC lookup (authority, bond and insurance on file).
Related
FAQ
What is a freight factoring company?
A company that buys your unpaid freight invoices and advances cash quickly, collecting from the broker or shipper.
Recourse or non-recourse?
Recourse means you repay if the customer does not pay; non-recourse shifts some credit risk to the factor, usually only for defined events like insolvency.
Can I leave a factoring contract?
Check the term, notice period, termination fees and UCC release before signing.