Factoring
Selling an unpaid load invoice to a factoring company for cash today instead of waiting weeks for the broker to pay.
Factoring is how a lot of small carriers get paid fast. Instead of waiting 30 to 60 days for a broker to pay your invoice, you sell that invoice to a factoring company. They pay you most of it right away, usually within a day, and then they collect the full amount from the broker later.
You pay for the speed. The factoring company keeps a fee, often somewhere between 1 and 5 percent of the invoice, and sometimes holds back a small reserve until the broker pays. On a $2,000 load at a 3 percent fee, that is $60 to have the money now instead of next month.
Factoring can be “recourse” or “non-recourse.” With recourse, if the broker never pays, you have to buy the invoice back. Non-recourse costs more but the factoring company eats most of that risk. Either way, the point is cash flow: fuel and truck payments do not wait for a broker’s payment terms.
Related: rate confirmation, broker, proof of delivery.