How Much Do Freight Factoring Companies Charge?
Updated: Mar 16
Freight factoring rates are a big deal to a lot of carriers. Sometimes that is the determining decision of what company they end up factoring with. But it is important to understand that A LOT more goes into what a freight factoring company charges that many people do not fully understand.
So, how much do freight factoring companies usually charge?
Well, it depends. The biggest factors that influence the rate are how long your company has been in business, the number of active trucks you run, your volume of freight hauled, your total monthly revenue, and the length of the factoring contract.
Freight factoring rates are typically charged as a percentage of the load or freight bill. Those rates will normally range between 1% and 5% (depending on the factors services and your company). You're probably now thinking, how does that fee work?
You send in your freight bill. In this example let's say it's $1000.
The freight factoring company multiplies their rate (in this case it's 3%) by the total invoice amount > $1000 x 3% = $30
The freight factoring company then subtracts their factoring fee ($30) and any other fees (for examples this person wants an ACH direct deposit which is $3) from the total freight bill amount > $1000 - $30 - $3 = $967. The fee price will vary depending on services that the favor offers and what you choose to use for your business.
The remaining portion ($967) is sent to you via the selected payment method.
And this is how the process works to get you paid:
You book a load with a broker.
You receive a rate sheet/confirmation telling you how much the broker is agreeing to pay you for running that load.
You pick up the load. You'll receive a BOL with the contents of the load and the BOL must be signed by the shipper confirming the pick-up.
You haul the load.
You drop off the load. The BOL must be signed by the receive confirming the drop off.
You take a picture of the BOL and send it with the rate confirmation to the freight factoring company.
Other fees that might be included in your factoring rate (these depend on the company you work with and your business needs):
Bank fee (ACH, Wire, Fuel Card fund)
Same day funding fee (in addition to the wire fee)
Invoice or billing fee
Incremental fee rate (when the fee goes up based on how long the broker takes to pay)
Wrong paperwork fee
Double email fee
Termination fee (usually early termination, but some companies charge a termination no matter when you leave even if you complete the agreed contract term)
Startup or origination fee
Minimum funding fee
Reserve release fee
Fuel advance fee
Intro rate fee
Long story short, the upfront factoring rate that so many carriers use as a determination of who they work with, is only a VERY SMALL portion of what goes into how much a freight factoring company charges.
A freight factoring companies' fee is nothing to be alarmed about. If you know the additional services you get or don't get with each factor, your decision with who you want to work with will be easier. Think of it this way: would you rather have a low fee, BUT never get your rep on the phone, have hidden terms and fees within the contract that you don't know about that end up costing you more, and continuously be disappointed? OR Have a slightly higher rate, always able to speak with your rep, don't need to worry about paying more in the long run as there are no hidden fees or terms, and watch your company as it grows and profits?