Factoring companies buy your invoices at a small discount and pay you within 24 hours. For carriers with a thin cash cushion, it's often the difference between growing and going out of business.
Rates and structure
Typical rates: 2–4% of invoice. Watch for tiered pricing, minimum monthly volumes, and 'ACH fees' that add up.
Recourse vs non-recourse
Recourse factoring is cheaper but you owe the money back if the broker fails to pay. Non-recourse is more expensive but the factor takes the credit risk. Non-recourse is worth it if you run new brokers.
Contract length
Avoid multi-year contracts. Month-to-month or 90-day contracts are the industry standard for reputable factors. Anyone asking for a 3-year lock is a red flag.
Factoring + dispatch together
Most trucking dispatch services work seamlessly with factoring — the dispatcher submits paperwork to your factor the day of delivery, and cash hits your account the next morning. Insist that any dispatcher you hire has an existing workflow with major factors.
The bottom line
Factor if you need the cash flow, but shop three companies, negotiate the rate, and never sign a multi-year contract. Your future self will thank you.