Freight factoring is a financial tool that many owner operators use to solve one of the most persistent challenges in trucking — slow broker payments. Here is everything you need to know about factoring and whether it is right for your business. What is Freight Factoring — Factoring is when you sell your unpaid invoices to a factoring company in exchange for immediate payment. Instead of waiting 30 to 60 days for a broker to pay you the factoring company pays you within 24 to 48 hours and then collects payment from the broker themselves. How Does it Work — After delivering a load you submit your invoice and proof of delivery to the factoring company. They verify the load and advance you typically 90 to 97 percent of the invoice value immediately. When the broker pays the factoring company they send you the remaining balance minus their fee. How Much Does it Cost — Factoring fees typically range from 1.5 to 5 percent of the invoice value depending on the factoring company, your volume, and the creditworthiness of your brokers. Types of Factoring — Recourse factoring means you are responsible if a broker does not pay. Non recourse factoring means the factoring company absorbs the loss if a broker defaults. Non recourse factoring costs more but offers greater protection. Is Factoring Right for You — If cash flow is a constant challenge and you are regularly waiting more than 30 days for broker payments factoring can be a valuable tool. If your brokers pay quickly the fees may not be worth it. At BlackCheetah LLC we help our dispatch clients evaluate their cash flow options and connect them with reputable factoring companies when appropriate. Call 347-832-8251 today.
