ENTRY 01 / FACTORING EXPLAINED
What is factoring in trucking, and how does it work?
By Daniel. Updated October 2026.
ENTRY 02 / WHAT FACTORING IS NOT
Factoring isn't a loan, in the usual structure
With a loan, you borrow money and owe it back with interest, whatever happens to your invoices. With factoring, you sell the invoice. The factor is buying the broker's promise to pay, which is why it checks your brokers' credit more closely than yours, and why a new MC can usually qualify.
Under US accounting rules (ASC 860), a transfer of receivables that qualifies as a true sale comes off your balance sheet and creates no debt. A recourse arrangement, where you keep the risk of non-payment, may instead be recorded as a secured borrowing. Your contract decides which, so ask your accountant how to book it.
Factoring also isn't a fuel advance or a broker's quick pay, though both can look similar. A fuel advance is cash before delivery, usually tied to a factoring account. Quick pay is a broker paying one invoice early for a fee, with no contract and no factor involved.
SOURCE: BLUE & CO., ASC 860 AND ACCOUNTS RECEIVABLE FACTORING, OCT 2026
ENTRY 03 / THE PROCESS, TERM BY TERM
Seven steps, and every word the factor will use at each one
Factoring contracts are full of terms that make sense only once you see where they happen. Tap a term to read what it means at that step.
Account opened
YOU AND THE FACTOR
Brokers notified
FACTOR TO EACH BROKER
Load delivered, paperwork sent
YOU TO THE FACTOR
Invoice verified
FACTOR WITH THE BROKER
You are paid the advance
FACTOR TO YOU
Broker pays the factor
BROKER TO FACTOR
Reserve released, fee kept
FACTOR TO YOU
STEP 2 · BROKERS NOTIFIED
Notice of assignment (NOA)
A letter telling the broker to pay the factor, not you, for every invoice from your company. You send it once per broker, usually with your carrier packet.
Steps 1 and 2 happen once. Steps 3 to 7 repeat for every load. Most of the time, the only part you see is uploading paperwork in step 3 and the advance landing in step 5. The rest runs in the background, unless a broker disputes the amount or pays very late.
ENTRY 04 / WHAT YOU SEND
The documents that get a load funded the same day
Nearly every funding delay comes from paperwork, not the factor. A rate on the invoice that doesn't match the rate con, a POD with no signature, or a detention charge with no record of times will hold up the whole invoice until it is fixed.
Photograph documents flat, in good light, with every edge visible, and upload them the day you deliver. Most factors have a daily cutoff for same-day funding, so a POD sent in the evening may not be paid until the next business day.
One trap to avoid: if a broker pays you directly by mistake after it has your NOA, that money belongs to the factor. Tell the factor the same day and send it on, as most contracts require. Keeping it, even for a week, can break the agreement and cost you far more than the fee you saved.
- Rate confirmation. In your company name, signed by you. Its total is what the factor will verify.
- Signed bill of lading or POD. Receiver signature, date, and any notes about shortages or damage.
- Invoice. To the broker, matching the rate con, with your MC number and the load number.
- Accessorial proof. Lumper receipts, detention times or scale tickets for anything billed above the line haul.
ENTRY 05 / WORKED EXAMPLE
One load, factored, on a settlement statement
An EXAMPLE owner-operator, not a real carrier, delivers a load with a $2,700 line-haul rate and $150 of detention on the rate con. The invoice is $2,850. The factor advances 90% and charges a flat 3%, both inside the typical ranges DAT reports.
The day after delivery, $2,565 lands in the owner's account. When the broker pays the factor 30 days later, the $285 reserve is released minus the $85.50 fee, so $199.50 more arrives. In total the owner keeps $2,764.50 of the $2,850 invoice, and paid $85.50 to have most of it a month early.
Spread over the 900 miles of this load, factoring cost about 9.5 cents a mile. That belongs in the owner's cost per mile, next to fuel and insurance, when deciding which loads clear their floor rate.
| Item | Amount |
|---|---|
| Advance at 90%Next business day | $2,565.00 |
| Reserve heldReleased when the broker pays, day 30 | $285.00 |
| Factoring fee at 3%Taken from the reserve | ($85.50) |
| NET | $2,764.50 |
What changes in your week once you factor
Before you book
Check the broker against your factor's approved list. If the factor won't buy that broker's invoices, you will wait for payment yourself, and the factor is telling you something about how that broker pays. Most factors let you look a broker up in their app in seconds.
At delivery
The paperwork becomes the payday. Get the receiver to sign and print a name, photograph the POD before you leave the dock, and upload it with the rate con the same day, ahead of the factor's cutoff.
At the end of the week
Match the factor's statement to your loads: one advance per invoice, the fee at the agreed rate, reserves released for invoices the brokers paid. Ten minutes a week catches the small mistakes before they add up.
ENTRY 06 / RECOURSE VS NON-RECOURSE
Who eats the loss when a broker never pays
Recourse factoring: if the broker doesn't pay within a set time, you buy the invoice back, often by having it deducted from your next advances. Rates are usually lower because you keep the risk.
Non-recourse factoring: the factor takes some of the risk, usually only if an approved broker becomes insolvent. A dispute over damage or a late delivery is normally still yours. Rates are usually higher.
The label matters less than the clause, so read what events are covered. The full comparison is in recourse vs non-recourse factoring, and the wider view of rates, contracts and who factoring suits is on our freight factoring page. When you are ready for real numbers, a factoring quote takes about a minute.
Factoring questions
Q01Who collects from the broker?
The factor does. Once the broker has your notice of assignment, it pays the factor directly on its normal terms, and the factor follows up on late invoices. You stay in touch with the broker about loads, but you no longer chase payment. Read your contract for what happens if a broker disputes an invoice.
Q02What happens if the broker pays late?
Usually nothing changes for you at first: you already have the advance. Some contracts charge a higher fee the longer an invoice stays open, and under recourse, an invoice unpaid past a set number of days, often 60 to 90, may be charged back to you. Check both terms before you sign.
Q03How is the factoring fee calculated?
As a percentage of the invoice, typically 2% to 5% according to DAT. Some factors charge a flat rate no matter when the broker pays; others charge a base rate for the first 30 days and add more for each period after that. Extra charges for ACH, wires or same-day funding are billed separately.
Q04What is an NOA?
An NOA, or notice of assignment, is the letter that tells a broker your invoices now belong to the factor and must be paid to it. Without it, the broker would keep paying you, and the factor couldn't collect. You send one to each broker you haul for, usually once.
Q05How does freight factoring work step by step?
You open an account, and the factor files a UCC-1 and sends NOAs to your brokers. After each delivery you upload the rate con, POD and invoice. The factor verifies the load, pays you the advance, collects from the broker on its terms, and releases the reserve minus its fee.
We refer carriers to our factoring partner and may be paid for referrals. It never changes your rate. Disclosure.
By Daniel
UPDATED OCTOBER 2026