Factoring solves trucking's oldest problem: brokers pay in 30 days, diesel wants paying today. It is the most common financial tool among new owner-operators, and also the one most commonly kept long after it stops making sense.
How it works
You deliver a load. The broker owes you $2,000 on net 30. Instead of waiting, you sell that invoice to a factoring company. They wire you around $1,900 tomorrow. They collect the full $2,000 from the broker in 30 days. The difference is their fee.
The mechanics in order:
- Deliver, collect signed BOL and POD
- Submit the invoice through the factor's app or email
- Factor verifies delivery with the broker
- Factor advances 90 to 97 percent, usually within 24 hours
- Broker pays the factor directly, per your Notice of Assignment
- Factor releases the reserve minus their fee
What it actually costs
| Fee Type | Typical Rate | What It Means |
|---|---|---|
| Factoring rate | 2 to 5% of invoice | The real fee, taken from every invoice |
| Advance rate | 90 to 97% upfront | What hits your account immediately |
| Reserve hold | 3 to 10% | Held until the broker pays, then released |
| Monthly minimum | Varies | Some factors penalize low volume |
Advance rate and factoring rate are not the same number, and salespeople blur them. A 97 percent advance at a 5 percent rate is worse than a 90 percent advance at a 2 percent rate. The rate is what you pay. The advance is just timing.
Recourse vs non-recourse
Recourse: if the broker never pays, you repay the advance. Cheaper. Most common.
Non-recourse: the factor eats the loss if the broker goes under. More expensive, and here is the catch almost nobody reads: non-recourse usually covers broker insolvency only. Not disputed invoices. Not short pays. Not a broker who simply refuses. Those are exactly the situations that hurt carriers, and non-recourse typically does not touch them.
Factors commonly used by owner-operators
- OTR Capital: no long-term contracts, same-day funding
- RTS Financial: strong bundled fuel card program
- Triumph Business Capital: large, established
- Riviera Finance: flexible, accessible to new authority
- Denim: app-based, technology-forward
Compare three things: contract length, monthly minimum, and whether the rate is flat or tiered by broker credit. A 12-month contract with a volume minimum can cost more than a higher headline rate with no strings.
Getting approved is easier than you think
Factors underwrite the broker who owes the money, not you. Your brand new MC with no credit history is largely irrelevant to them, which makes factoring one of the few financing tools genuinely open to first-year carriers.
When to quit
Run the number. At 3 percent on $300,000 of annual revenue, factoring costs $9,000 a year. Once you have the reserve to float net 30 yourself, dropping it is a $9,000 raise that requires no additional miles. Most successful carriers treat factoring as a first-year bridge, not a permanent fixture. Fees are at least fully deductible while you use it.
Not sure factoring is the right tool at all? Compare it against broker quick pay programs, which cost less and require no contract but only work with brokers who offer them.