OPERATIONS · CASH FLOW
Freight
Factoring
Sell your invoices today for 90-97% cash instead of waiting 30-90 days. The mechanics, the top companies, and the year-long contract traps that lock small carriers in — even after they hate the deal.
A short-term loan against your unpaid invoices
Freight factoring is not a mystery. You deliver a load. The broker owes you $2,000 on net-30 terms. Instead of waiting 30 days, you hand the invoice to a factoring company. Within 24 hours they wire you ~$1,900 (95% advance). When the broker eventually pays, the factor collects the $2,000 and returns the $100 reserve minus their fee.
Fuel, driver payroll, truck payments, and insurance premiums do not wait 30-90 days. A small carrier with 3-5 trucks burns through cash the moment a driver rolls out of Bishkek — the money has to come back the same week or the wheels stop.
Five steps from load delivery to money in your account
- Deliver + get signed POD. Rate confirmation + BOL + POD (Proof of Delivery) — these three documents ARE the invoice. Anything missing = no advance.
- Submit to the factor. Photo the docs into their app or upload to a portal. Most factors accept email-only submission for the first few months, then require the portal.
- Factor verifies + wires advance. They call the broker to confirm the load was delivered and the invoice is legitimate. Fast factors do this in 2-4 hours. Slow ones take 2 days.
- Broker pays the factor (not you). A Notice of Assignment (NOA) is sent to the broker. From this point, the broker MUST send payment to the factor's remit-to address, not yours. If they pay you by mistake, you legally owe that money to the factor.
- Factor releases the reserve minus fee. On a $2,000 invoice at 95% advance / 3% factor rate: you get $1,900 upfront, then $40 reserve refund ($100 reserve minus $60 fee = 3% of $2,000). Total you keep: $1,940. Factor keeps: $60.
Recourse vs non-recourse — one is a loan, the other is a sale
Recourse factoring
Cheaper (1.5-3% typical). If the broker doesn't pay in 60-90 days, YOU buy back the invoice from the factor. Credit risk stays with you. Best for carriers who vet brokers carefully and haul mostly for shippers/brokers with strong credit.
Non-recourse factoring
More expensive (3-5% typical). Factor eats the loss if the broker goes bankrupt. BUT read carefully — 'non-recourse' usually only covers broker BANKRUPTCY, not slow-pay or dispute. If the broker just refuses to pay because they claim damage, that comes back to you anyway.
They pay 5% for 'non-recourse' thinking they are protected against any bad broker. In reality the coverage is narrow. Real protection = credit-check every new broker BEFORE hauling (most factors do this free through their portal), skip loads with weak credit, and factor recourse. You will keep an extra 2% of every invoice.
What factoring actually costs you per year
A carrier grossing $500,000/year at 3% factor rate pays $15,000 in fees. That is one truck's fuel for two months, or a driver's healthcare for the year. Every 0.5% you shave off = $2,500 back.
| Annual gross | 1.5% (best) | 3% (average) | 5% (bad deal) |
|---|---|---|---|
| $250,000 | $3,750 | $7,500 | $12,500 |
| $500,000 | $7,500 | $15,000 | $25,000 |
| $1,000,000 | $15,000 | $30,000 | $50,000 |
| $2,500,000 | $37,500 | $75,000 | $125,000 |
Rates are volume-based. A 1-truck carrier is quoted 3.5-5%. A 10-truck carrier at $2M/year negotiates to 1.5-2.5%. Two moves that lower your rate: (1) show 6+ months of statements to a competing factor and get a written offer, (2) commit to a minimum monthly volume (e.g. $50K/mo) — most factors give a 0.5-1% discount for volume commitments.
Who to call and what to expect
Six factors handle most of the small-carrier freight market. All numbers below are typical starting points — your actual quote depends on volume, credit, and negotiation. Never sign a first offer.
RTS Financial
LargestOwned by Ryder. Fuel card discounts (~$0.30-$0.50/gal) are the real reason many carriers pick them — often more valuable than the factor rate itself. Portal is dated but reliable. Best for carriers that put 10K+ gallons/month through the RTS fuel network.
Apex Capital
Small-carrier friendlyAggressive on 1-3 truck carriers. Free credit checks in-portal, load board included, decent fuel discounts. Well-known 12-month contract with an early-termination fee — this is where many carriers get stuck. Read the termination clause BEFORE signing, not after.
TAFS (Transportation Alliance Bank)
Low-rate leaderActually a bank (TAB Bank division). Rates are the lowest in the industry — but recourse-only, and they underwrite tightly. If you have thin credit or the broker mix is risky, they may pass. When they take you, you save real money. Best for established carriers with clean history.
OTR Solutions
Fastest funding100% advance means no reserve — the full invoice hits your account. Real-time funding through Nova (their mobile app) is genuinely 15-minute after doc submission. Higher rate is the price for that speed and simplicity. Popular with newer 1-2 truck owner-operators for exactly that reason.
TBS Factoring
Full back-officeBundles factoring with dispatch, DOT compliance, IFTA filing, permits. Higher rate makes sense if you would pay for those services separately anyway. Bad fit if you already have office staff or a dispatch service — you would be double-paying.
Triumph Business Capital
EnterpriseAlso a bank (Triumph Bancorp). Best rates in the industry for 5+ truck fleets. Runs the Load Pay / TriumphPay platform that a lot of brokers already use to pay carriers directly — that ecosystem overlap can shave days off funding. Overkill for 1-2 truck carriers.
Contract traps that lock you in for a year
1. Auto-renewal clause
Contract renews for another 12 months unless you cancel in a 30-day window BEFORE expiration. Miss the window = another year. Set a calendar reminder for month 10 the day you sign.
2. Early-termination fee
$2,500-$10,000 penalty for leaving early. Sometimes calculated as a % of remaining months × average monthly volume. Ask for it in dollars, get it in writing, and negotiate it down BEFORE signing (many factors quietly drop it if you push).
3. Minimum monthly volume
If you factor less than $X/month, you owe the factor a shortfall fee (usually a % of the gap). This kills you when a truck breaks down or a driver quits. Push the minimum to a number below your worst month.
4. UCC-1 filing
Factor files a UCC-1 against your receivables. This is NORMAL and required — but when you switch factors, the old UCC must be released first or the new factor can not fund you. Old factor may drag their feet on the release specifically to make switching painful. Get the release clause in the ORIGINAL contract: 'UCC released within 5 business days of account closure.'
5. Chargeback for non-paying brokers
On recourse deals, if the broker doesn't pay in 60-90 days the factor pulls the money BACK from your next advance. On a bad month you can see your funding cut in half. Keep 60 days of cash reserve in a separate account so a chargeback does not stop your trucks.
Alternatives to factoring — and when they beat it
Broker Quick-Pay
Big brokers (Landstar, CH Robinson, Coyote, Convoy, TQL) offer to pay you in 2-3 days for a 1.5-3% discount. Same net cost as low-tier factoring, no contract, no UCC, no monthly minimum. If you haul mainly for 2-3 large brokers, quick-pay may be all you need.
Line of Credit
A revolving business LOC from a real bank ($50K-$500K, prime + 2-4%). Cheaper than any factor, no per-invoice fee — but requires 2 years of tax returns, personal guarantee, and clean credit. Best for established carriers ready to graduate off factoring.
Terms you must know
- Advance Rate
- Percentage of invoice value paid to you upfront (usually 90-97%). Rest = reserve.
- Factor Rate
- Fee the factor keeps, as % of invoice (usually 1.5-5%).
- Reserve
- The 3-10% of the invoice held back until the broker pays. Refunded to you (minus fee) when broker pays.
- NOA
- Notice of Assignment. Legal notice sent to the broker telling them to pay the factor instead of you.
- UCC-1
- Public financial filing that establishes the factor's lien on your receivables. Must be released before you can switch factors.
- Recourse
- If broker does not pay, you owe the factor. You keep the credit risk. Cheaper rate.
- Non-recourse
- If broker goes bankrupt, factor eats the loss (usually — read the fine print). Higher rate.
- POD
- Proof of Delivery. Signed document showing the load was delivered. Required for the factor to advance.
- Chargeback
- Factor pulling money back from your next advance when a prior invoice went unpaid.