Key Takeaways
- What it is: Freight factoring lets you sell unpaid invoices to get cash within 24-48 hours instead of waiting 30-90 days
- Cost: Fees typically range from 1.5% to 5% of invoice value
- Advance rate: Most trucking factors advance 90-97% of the invoice upfront
- Requirements: B2B invoices only, products/services already delivered, payment terms under 90 days
- Best for: Owner-operators and carriers who need fast cash for fuel, payroll, and growth
- Credit score: Your customers' credit matters more than yours
Cash flow is the lifeblood of any trucking business. You deliver a load, send your invoice, and then wait. Sometimes 30 days. Sometimes 60. Meanwhile, fuel costs pile up, drivers need their pay, and new opportunities slip away because you lack the working capital to take them on.
This is where freight factoring comes in. For thousands of trucking companies across Canada, factoring has become an essential financial tool to keep trucks moving and businesses growing.
This guide covers everything you need to know about factoring for the trucking industry: how it works, what it costs, and how to choose the right factoring company for your carrier business.
What Is Freight Factoring?
Freight factoring (also called trucking factoring or transportation factoring) is a financing solution where a trucking company sells its unpaid invoices to a factoring company in exchange for immediate cash.
Instead of waiting weeks or months for shippers and brokers to pay, you get most of your money within 24 to 48 hours. The factoring company then collects payment directly from your customer when the invoice comes due.
Here is how it works in practice:
| Step |
What Happens |
Timeline |
| 1 |
You deliver a load and submit the invoice + proof of delivery to the factoring company |
Same day |
| 2 |
The factor verifies the invoice and advances 90-97% of the invoice value |
24-48 hours |
| 3 |
Your customer pays the invoice according to original terms |
30-60 days |
| 4 |
The factor sends you the remaining balance minus their fee |
Upon collection |
Key point: Factoring is not a loan. You are selling an asset (your invoice), not borrowing money. This means no debt on your balance sheet and no monthly repayments to manage.
Why Trucking Companies Need Factoring?
The trucking industry faces unique cash flow challenges that make factoring especially valuable.
1
Fuel Costs Cannot Wait
Diesel prices fluctuate, but one thing stays constant: you need fuel to run. Most fuel stops expect payment on the spot. You cannot tell them to wait 45 days while your broker processes your invoice.
2
Drivers Expect Regular Pay
Whether you run a fleet or work as an owner-operator, payroll obligations do not pause for slow-paying customers. Factoring ensures you have the cash to meet every pay period without stress.
3
Growth Requires Capital
Landing a new contract feels great until you realize you need more trucks, more drivers, and more fuel to fulfill it. Factoring gives you the working capital to scale up without turning down opportunities.
4
Banks Often Say No
Traditional financing can be difficult for trucking companies, especially newer carriers or those with imperfect credit. Factoring companies focus on your customers' creditworthiness, not yours, making approval much easier.
How Freight Factoring Works: Step by Step
Let us walk through a typical factoring transaction for a Canadian trucking company.
Scenario: You haul a load from Toronto to Calgary for a broker. The invoice is $5,000 with 45-day payment terms.
1
Submit Your Invoice
After delivery, you send the invoice and bill of lading to your factoring company. Most factors offer online portals or mobile apps to make this process quick and simple.
2
Receive Your Advance
The factoring company verifies the load and checks your customer's credit. Once approved, they advance you a percentage of the invoice value. For trucking, this is typically between 90% and 97%.
In this example: You receive $4,750 (95% advance) within 24 hours.
3
Factor Collects Payment
Your customer pays the invoice according to the original 45-day terms, but they send payment to the factoring company instead of you.
4
Get Your Remaining Balance
Once the factor receives payment, they send you the remaining $250 minus their factoring fee. If the fee is 3%, you receive $100 ($250 minus $150 fee).
Your total received: $4,850 out of $5,000, with most of it in your account within a day of delivery.
Factoring Fees and Rates: What to Expect
Factoring fees for trucking companies typically range from 1.5% to 5% of the invoice value. Several factors influence your rate:
1. What Affects Your Factoring Rate?
| Factor |
Impact on Rate |
| Invoice volume |
Higher volume = lower rates |
| Customer credit quality |
Stronger customers = lower rates |
| Payment terms |
Shorter terms = lower rates |
| Contract type |
Long-term contracts may offer better rates |
| Recourse vs non-recourse |
Non-recourse costs more |
2. Watch for Hidden Fees
Beyond the base factoring rate, some companies charge additional fees:
- Application or setup fees (one-time)
- ACH or wire transfer fees (per transaction)
- Monthly minimum fees (if you do not factor enough invoices)
- Invoice processing fees (per invoice)
- Early termination fees (if you cancel your contract)
Pro tip: Always ask for a complete fee schedule before signing. The best factoring companies are transparent about all costs upfront.
Recourse vs Non-Recourse Factoring
One of the most important decisions when choosing a factoring company is whether to use recourse or non-recourse factoring.
1 Recourse Factoring
With recourse factoring, you remain responsible if your customer does not pay. If the broker or shipper defaults, you must buy back the invoice or replace it with a collectible one.
Pros: Lower fees, easier approval, more flexibility
Cons: You carry the credit risk
2 Non-Recourse Factoring
With non-recourse factoring, the factoring company assumes the credit risk. If your customer cannot pay due to insolvency or bankruptcy, the factor absorbs the loss.
Pros: Protection against bad debt, peace of mind
Cons: Higher fees, stricter customer requirements, may not cover all non-payment scenarios
For most trucking companies: Recourse factoring offers the best value. Your customers are typically established brokers and shippers with solid credit, so the risk of non-payment is relatively low.
Benefits of Freight Factoring for Trucking Companies
1
Immediate Access to Cash
No more waiting 30, 60, or 90 days for payment. Get your money within 24 to 48 hours of submitting your invoice.
2
Fuel Advances and Cards
Many factoring companies offer fuel advance programs and fuel cards with discounts at major truck stops across Canada and the US. This can save you thousands of dollars per year on fuel costs.
3
No Debt on Your Balance Sheet
Since factoring is the sale of an asset rather than a loan, it does not add debt. This keeps your financial ratios healthy and preserves your borrowing capacity for other needs.
4
Credit Checks on Customers
Factoring companies perform credit checks on your brokers and shippers before you haul their loads. This helps you avoid working with customers who have a history of slow or non-payment.
5
Back Office Support
Many factors handle collections, freeing you from chasing payments. Some also offer additional services like fuel tax reporting or load board access.
6
Grows with Your Business
Unlike a fixed line of credit, factoring scales with your revenue. The more loads you haul, the more funding you can access.
How to Choose the Right Factoring Company
Not all factoring companies serve the trucking industry equally. Here is what to look for when evaluating your options.
1
Industry Experience
Choose a factor that specializes in transportation and understands the unique needs of carriers. They will process your invoices faster and handle issues more effectively than a generalist.
2
Advance Rates
Compare the percentage each company advances. In trucking, you should expect advances between 90% and 97%. Lower advances mean less cash in your pocket upfront.
3
Fee Transparency
Request a complete breakdown of all fees. Avoid companies that are vague about their pricing or bury charges in the fine print.
4
Funding Speed
Ask how quickly you will receive funds after submitting an invoice. Same-day funding is common among top trucking factoring companies.
5
Contract Terms
Some factors require long-term contracts with minimum volumes. Others offer flexible month-to-month arrangements. Choose terms that match your business needs.
6
Customer Service
You will interact with your factoring company regularly. Make sure they offer responsive support and treat your customers professionally during the collection process.
7
Additional Services
Consider value-added services like fuel cards, fuel advances, free credit checks, load boards, and online portals. These extras can make a significant difference in your daily operations.
Factoring for Owner-Operators vs Fleet Carriers
Freight factoring works for trucking businesses of all sizes, but the specifics may differ.
As an owner-operator, you likely factor every load to maintain steady cash flow. Look for factoring companies with:
- No minimum volume requirements
- Low or no startup fees
- Flexible contracts
- Fuel card programs with competitive discounts
Larger carriers may factor selectively or use factoring alongside traditional financing. Key considerations include:
- Volume-based rate discounts
- Integration with your accounting software
- Dedicated account management
- Higher advance rates for established relationships
Common Questions About Trucking Factoring
1
Do I need good credit to qualify?
No. Factoring companies focus on your customers' creditworthiness, not yours. Even carriers with poor credit or limited history can qualify if they haul for reliable brokers and shippers.
2
Can I choose which invoices to factor?
This depends on your agreement. Some factors require you to factor all invoices from certain customers. Others offer spot factoring where you choose invoices as needed.
3
Will my customers know I use factoring?
Yes. Your customers will receive notice that payment should go to the factoring company. This is standard practice in the trucking industry and most brokers and shippers are familiar with the process.
4
How fast can I get set up?
Most trucking factoring companies can approve your application and fund your first invoice within 24 to 48 hours. Have your business documents, customer list, and sample invoices ready to speed up the process.
5
Can I switch factoring companies?
Yes, though you may need to fulfill any existing contract obligations first. Some factors offer to buy out your current contract to win your business.
Eligibility Requirements: What You Need to Qualify
Getting approved for freight factoring is typically faster and easier than traditional financing. Here is what most factoring companies look for.
| Requirement |
Details |
| Business type |
B2B only (you invoice other businesses, not consumers) |
| Invoice status |
Products delivered or services completed (no work in progress) |
| Payment terms |
Typically 0 to 90 days |
| Customer credit |
Your customers must have reasonable creditworthiness |
To get started with factoring, prepare the following:
- Business documents: Business license, articles of incorporation, EIN/business number
- Accounts receivable aging report: Shows your current outstanding invoices
- Customer list: Names and contact information for your brokers and shippers
- Sample invoices: Recent invoices with supporting documentation
- Proof of delivery: Bills of lading, delivery receipts, or signed PODs
- Contract or rate confirmation: Agreement showing the agreed rate for each load
Here is the good news: your personal or business credit score matters far less in factoring than in traditional lending. Factoring companies focus primarily on your customers' ability to pay.
This means trucking companies can qualify even with:
- Limited operating history
- Past credit challenges
- No collateral beyond their receivables
Application timeline: Most trucking factoring companies can review your application and fund your first invoice within 24 to 48 hours if your documents are in order.
Is Freight Factoring Right for Your Trucking Business?
Factoring makes sense if you:
- Need faster access to cash than traditional payment terms allow
- Want to take on more loads without cash flow constraints
- Struggle to qualify for traditional bank financing
- Prefer to focus on driving rather than chasing payments
- Need fuel advances or discounts to manage operating costs
Factoring may not be the best fit if:
- Your customers already pay within 7-14 days
- Your profit margins are too thin to absorb factoring fees
- You prefer complete control over customer relationships
Take the Next Step
Cash flow challenges should not hold your trucking business back. Whether you are an owner-operator running a single truck or a fleet carrier managing dozens of units, freight factoring can give you the financial flexibility to operate confidently and grow.
The rightfactoring partner becomes an extension of your business, providing not just funding but also valuable services and support tailored to the transportation industry.
Ready to explore factoring solutions for your trucking company? Get in touch with our team to discuss your needs and discover how we can help keep your trucks moving.
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