Financial management has a steep learning curve for many truck drivers. From all of the expenses and overhead to juggling cashflow and invoicing, it can be easy to wind up in a financially unstable position. For many, the delay in invoice payments is a particular pain point. But don’t let this stop you from pursuing your trucking business—the solution may be a process known as freight factoring. 

What Does Freight Factoring Mean for Truckers? 

In the trucking industry, cash flow can be a major challenge. For freight brokers or shippers, it’s common to have to wait 30–90 days to get paid after a load, which can make it hard to pay expenses in the meantime. That’s why freight factoring exists. 

Freight factoring is the process of selling your outstanding invoices to a company in exchange for cash. This means truckers can gain access to immediate cash rather than having to wait for the delayed invoices to come through. These services can be especially helpful for newer trucking companies that need extra cash flow as they get started, allowing them to continue to pay expenses and take on additional loads, even when there are outstanding invoices owed to them.¹ 

Before freight factoring, many owner-operators had to rely on bank loans and credit cards to stay afloat, which is a much riskier option than freight factoring. That being said, freight factoring is not a new invention and has been around for decades. It’s a tried-and-true financial solution for the industry.² 

How Does Freight Factoring Work? 

The process is fairly straightforward: 

1. First, a trucking company will apply with a freight factoring company. When they get approved, the factoring company will stipulate the terms and fees. 
2. The next time the trucking company books a load, they get a rate sheet and sign a bill of lading i at the pickup and drop-off. 
3. The trucking company can then send this bill of lading sheet to the freight factoring company. 
4. The factoring company then pays them the amount on the invoice, including any fees within their contract. Some factoring companies will even send payment to the trucking company within 24 hours. 
5. The factoring company then receives payment from the invoice in 30–90 days, whenever the broker or shipper would have paid the trucking company. 

What Are the Benefits of Freight Factoring? 

The main benefit is access to cash and working capital. It enables trucking companies to operate their business, cover expenses, and make necessary repairs, even if they are still owed payments from other jobs. It can help owner-operators as well as fleet managers take on more trucking loads, and start up and scale their business. 

Freight factoring can also help you reduce the amount of accounting work you have to do as an owner-operator by easing your forecasting. With delayed invoices, it’s hard to predict finances and expenses, and freight factoring eliminates this guesswork. Plus, freight factoring companies will also qualify brokers as part of their process, helping you to determine who is trustworthy.³ 

Are There Any Downsides to Freight Factoring? 

The only downside of freight factoring is the typically small fee that the factoring companies charge, although typically it is just a small percentage. Some factoring companies have a tiered fee structure, a flat fee structure, or a required monthly minimum. Usually, the size and age of your trucking business will contribute to the rates the factoring business offers you. Plus, if you have good credit, you will have very little risk working with a freight factoring company.¹ When you sign with a factoring company, make sure you read the contract clearly to ensure you agree to the terms they outline, and opt for factoring companies that have been in business for several years to ensure you are going with a trustworthy vendor.² 

Is Freight Factoring Considered Debt? 

No, freight factoring is not like a normal bank loan and isn’t considered debt—it’s much easier to qualify with a freight factoring business. 

Partner With ACV Transportation 

The best way to improve your business and increase your cash flow (with or without the help of a freight factoring company) is to take on more loads and work with a partner that pays quickly. ACV Transportation can help you with that. If you have a CDL and are looking for additional opportunities, partner with ACV Transportation to get access to loads delivering cars to car dealerships all over the country. ACV Transportation pays quickly, so you get paid within 5 business days of submitting a BOL. Reach out to us to learn more or get started today. 

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Sources

1. Porter Freight Funding. “Freight factoring explained: What is it and how does it work?” Porter Freight Funding. Retrieved December 19, 2024. https://www.porterfreightfunding.com/blog/what-is-freight-factoring/ 
2. Tafs. “What is freight factoring? The ultimate guide.” Tafs. Retrieved December 19, 2024. https://www.tafs.com/factoring/ultimate-guide-freight-factoring/  
3. Truckstop. “Freight factoring: What is it and how does it work?” Truckstop. Retrieved December 19, 2024. https://truckstop.com/blog/freight-factoring-what-is-it-and-how-does-it-work/