The short answer
Freight factoring is when a carrier sells its unpaid load invoices to a factoring company, which pays most of the amount right away and collects from the broker later, for a fee. Quick pay is when the broker itself pays faster than its normal terms in exchange for a fee. Both trade a small cost for faster cash.
What is freight factoring and how does it work?
- You deliver the load and get a signed BOL or POD.
- You send the invoice, rate confirmation and paperwork to your factoring company.
- The factoring company pays you the invoice amount minus its fee, often within a day or two.
- The broker pays the factoring company on its normal terms.
When you sign up, the factoring company usually sends brokers a notice of assignment, which tells them to pay the factoring company instead of you.
Recourse vs non-recourse factoring
- Recourse: if the broker doesn't pay, you owe the money back to the factoring company. Fees are usually lower.
- Non-recourse: the factoring company takes some of the risk if the broker can't pay, as the contract defines. Fees are usually higher.
Factoring vs quick pay
| Factoring | Broker quick pay | |
|---|---|---|
| Who pays you | The factoring company | The broker |
| Works with | Most brokers | Only brokers that offer it |
| Contract | Usually yes | Usually per load |
| Extra services | Often credit checks on brokers, fuel cards | None |
Freight factoring for owner-operators: what to read in the contract
- The fee and whether it changes with how long the broker takes to pay
- Minimum volume or monthly minimums
- How long the contract lasts and how to cancel
- Recourse terms and reserves
Prime Trucks Dispatch sends your paperwork to whichever factoring company you choose. We don't sell factoring or take a cut from it.
Common questions
Do I need factoring?
No. It's optional. It helps when you need cash sooner than brokers' payment terms.
Can I factor only some loads?
It depends on the contract. Some factoring companies require all loads.
Does Prime Trucks Dispatch work with my factoring company?
Yes. We send paperwork to the factoring company you use.