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How Does Truck Factoring Work?

Updated: Sep 14

Trucking factoring, also known as freight factoring or invoice factoring, is the process of a freight factoring company buying the accounts receivables of a trucking business. A trucking factoring company provides truck drivers with a convenient, reliable, and fast source of getting paid on their unpaid invoices. Trucking companies get consistent cash flow when they work with a freight factor.


A trucking factoring company will typically pay its clients within 24 hours of them sending their freight bills in. This is extremely beneficial for trucking company owners as it usually takes freight brokers or shippers 30 to 90 days to pay for a hauled load. Freight factoring makes cash available so that trucking companies are never low on funds to pay for expenses.


How does truck factoring work?

The main benefit of factoring agreements are the fast payments. The truck factor will charge a factoring fee to advance trucking companies the amount of their invoice immediately. Depending on the factoring company, pay times may vary. The best factoring companies will pay their clients within 24 hours of sending in their invoices.

  1. The trucking company books a load and gets a rate sheet. A BOL is signed at both locations to confirm pick-up and drop-off.

  2. The BOL and rate sheet is then sent to the factoring company so the trucking company can get paid.

  3. The trucking factor then advances the invoice amount minus the factoring fee with the agreed upon pay terms.

  4. The freight broker or shipper then pays the factoring company 30 to 90 days later.

Other factoring services

On top of getting fast payments to have consistent cash flow for your trucking business, factoring companies also offer additional services. The best factors will provide its clients with a network of partners to grow their businesses. Porter's clients get access to a database network of 250+ of the top freight brokers to work with to find the best paying loads. Clients also get a list of pre approved brokers and shippers, so that no one works with bad debtors who don't pay. Most transportation factoring companies will also provide credit history checks on all brokers for free.


Porter also gives its clients access to our insurance partners to find the best insurance rates, compliance assistance to avoid any costly mistakes when starting a trucking company or staying active, and a free fuel card with fuel advances and discounts at locations across the United States.


Why trucking companies benefit from freight factoring

Almost all trucking companies will benefit from factoring as it is a way to grow their businesses through getting consistent cash flow. It doesn't matter if you run a small business or a large one, having access to your working capital to stay on top of your company's expenses is always beneficial.


Depending on the size of the trucking company, how many years it has been in business, and its monthly revenue, trucking company owners choose between a recourse or non-recourse factoring program. With a non-recourse program, the truck factor incurs all the risk if a broker doesn't pay. This program is especially good for new trucking companies or ones who cannot afford to take a hit from a bad debtor. The trucking company is responsible for bad debtors in a recourse agreement, but the factoring rate is slightly lower because of this.


Trucking factoring companies also offer additional services for their clients like dispatching help and fuel cards. Porter Billing offers both of these services, plus compliance assistance and access to the best insurance rates.


For more information on how we can help you grow your trucking business, apply now or call us today at (205) 397-0934.

2112 1st Ave. N. Birmingham, AL 35203

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