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How factoring works
Factoring isn't a loan. You sell your unpaid invoice to a factoring company (the "factor"). It pays you most of the invoice now, waits for the broker to pay, and then sends you the rest minus its fee.
Where the money goes when you factor a load
Three parties, four steps.
Most factors also check brokers' credit before you haul, handle collections, and offer fuel advances or fuel cards. Those services are part of what you're paying for, so they belong in the comparison.
What rates new carriers are quoted
Industry guides put 2026 freight factoring rates between 1% and 5% of the invoice, with most carriers paying 2% to 3.5%. Solo owner-operators invoicing under about $25,000 a month are typically quoted 3% to 5%, because volume is one of the biggest drivers of price. Non-recourse plans usually cost about 0.5 to 1 percentage point more than recourse.1 Treat these as ranges to check quotes against, not promises. Your rate depends on your volume, your brokers' credit, the recourse type and the contract.
What each rate costs in a year
Yearly fees on $20,000 a month of factored invoices, before any extra fees.
Show as a table
| Rate | Fees per month | Fees per year |
|---|---|---|
| 2% | $400 | $4,800 |
| 3% | $600 | $7,200 |
| 4% | $800 | $9,600 |
| 5% | $1,000 | $12,000 |
A worked example
Say you're a one-truck owner-operator. You're quoted 3.5%, plus a $10 transfer fee per invoice. Your average load pays $2,500, you run 8 loads a month, and your brokers would otherwise pay in about 35 days.
| Item | Amount | How |
|---|---|---|
| Fee on one load | $87.50 | $2,500 × 3.5% |
| Transfer fee | $10.00 | per invoice |
| Total cost per load | $97.50 | 3.9% of the invoice, not 3.5% |
| Per month (8 loads) | $780 | $97.50 × 8 |
| Per year | $9,360 | $780 × 12 |
| Like borrowing at | about 41% a year | 3.9% × 365 ÷ 35 days |
That last line is the one to sit with. You're paying 3.9% to get your money about 35 days early. Repeat that all year and the cost is similar to borrowing at roughly 41% a year. It's a rough comparison, not an official APR, but it makes the point: factoring is expensive money that buys you speed and services. Sometimes that trade is worth it. It shouldn't be automatic.
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The fees outside the headline rate
A low headline rate can hide a high total cost. One industry guide puts it bluntly: "A 3% rate with no hidden fees is often cheaper than a 1.5% rate with a dozen add-on charges."1 Ask for a written list of every fee, including:
- Transfer fees: ACH or wire charges on each payment (one guide cites $2 to $25 per transfer).
- Monthly minimums: a fee if you factor less than a set amount (cited at $100 to $500).
- Same-day funding premiums, invoice processing or "service" fees, and application or setup fees.
- Fuel advance and fuel card costs: what each advance really costs, and any card fees.
- Termination fees and the cost of releasing the lien when you leave.
Add them up per invoice, then put the total into the calculator below.
Recourse vs non-recourse
Recourse means that if the broker doesn't pay, you owe the advance back. It's cheaper because you carry the risk. Non-recourse moves some of that risk to the factor and usually costs 0.5 to 1 point more.1 Read the definition carefully: "non-recourse" often covers only a broker's insolvency (going out of business), not a broker who disputes the load or pays late.2 Ask: "Exactly which situations are covered, and what do I owe if a broker short-pays?"
Contract traps that catch new carriers
- Long terms that auto-renew. A 12-month term that renews unless you give notice in a narrow window.
- "All invoices" clauses. You must factor every load, even from brokers who pay fast.
- Termination fees and slow release letters, which keep brokers paying the factor after you've left.
- UCC lien. Factors usually file a lien on your receivables. Ask how quickly it's released when you leave.
- Reserve rules. How much is held back, and when it's released.
Our getting-paid guide has the 10 questions to ask before you sign. Get the answers in writing, and read the actual contract, not just the sales sheet.
When factoring is worth it, and your exit plan
It can make sense when the cash gap would otherwise park your truck, you need broker credit checks because you don't know the brokers yet, or a fuel advance keeps you rolling. It's harder to justify when you have a cash cushion, your brokers pay reliably, or quick pay on the occasional slow broker would cover you.
The exit plan, from a finance point of view: treat factoring as a bridge you plan to cross once.
- Pick a contract you can leave: short term, no "all invoices" clause, clear release terms.
- Each month, move a fixed amount into a separate "cash gap" account. Even $1,500 a month builds a $13,000 cushion in about 9 months.
- Once that account covers about one month of costs, stop factoring the brokers who pay on time, and use quick pay only for the slow ones.
Done well, the fees you stop paying go straight to profit. In the example above, that's up to $9,360 a year.
Factoring cost calculator
Enter your own quote. It turns a percentage into dollars, and shows the yearly-rate comparison.
Factoring cost calculator
See what a factoring quote really costs. Your inputs stay in your browser.
The yearly-rate figure is a simple comparison, not an official APR: the fee as a share of the invoice × 365 ÷ the days you'd otherwise wait. It shows why factoring is a cash-flow tool, not cheap money. The monthly fee figure ignores any reserve the factor holds back, which you get later.
Get the free New Authority Survival Kit
The 90-day checklist and the new-entrant audit cheat sheet (16 automatic-fail violations) as printable PDFs. Instant download.
Sources
- oTrucking, "Freight factoring rates 2026" (industry guide; rate ranges, non-recourse premium and fee examples): otrucking.com.
- Saint John Capital, "Why Non-Recourse Factoring Is Growing in Trucking (2026)": saintjohncapital.com.
The worked example and chart are our own arithmetic on illustrative numbers. General information, not financial advice. Last checked October 14, 2026.