Trucking companies need to be careful when selecting a factoring company. While great factoring companies exist, the industry is rife with bad actors that intentionally take advantage of truckers.
These bad actors typically have hidden fees, monthly-minimums, and lock truckers into long-term contracts that are expensive or impossible to get out of. Unfortunately, some of the largest factoring companies use these tactics but continue to attract new clients because of large marketing budgets.
To help you avoid these companies, we put together a list of factors we feel comfortable recommending. We prioritized options that have competitive rates, above average customer service, and are more transparent than others in the industry.
Whether you decide to go with one of these factors or not, we strongly recommend carefully reading any contract before you sign it.
This cannot be stressed enough. Whatever you have been told by a company representative does not matter if it contradicts what is in the contract – the contract is all that matters.
Even if you are just giving approval for a credit check, always read the fine print because some factoring companies sneak in language that allows them to file a UCC against your company (which can prevent you from working with other factors).
If you need help reviewing a contract, we offer free assistance. You can contact our team here.
If you’re new to the industry, our guide below covers how factoring works, how much it costs, the pros/cons, and the top companies in the industry.
Truck factoring is when a trucking company sells its outstanding invoices to a factoring company for immediate payment minus a small fee.
Truck factoring is sometimes referred to as trucking factoring or freight factoring.
Factoring allows companies to receive faster payment for their services. Rather than waiting 30-90 days for an invoice to be paid, a company can sell its invoices for a small fee to a factoring company, which then collects payment from the company’s customers.
The factoring process is fairly straightforward:
Freight factoring can be a flexible solution for accounts receivable financing since most factoring companies don't require companies to factor all of their invoices. However, most factors do require companies to factor all invoices from a particular customer.
While rare, the most flexible form of factoring is spot factoring which is when companies can decide which individual invoices to factor, not just which customers.
Trucking companies factor invoices because they are typically paid 30-90 days after a load is delivered. This can cause cash flow problems because most companies don’t have enough working capital to cover fuel, insurance, and other expenses while they wait for invoices to be paid.
While immediate payment is the primary benefit, factoring has a number of pros:
While factoring has a range of benefits, drawbacks include:
Any business with creditworthy customers can factor invoices. In trucking, this usually means motor carriers and independent owner operators.
The financial condition or credit score of a company does not influence whether it can get approved for factoring. Instead, factors primarily evaluate the creditworthiness of the trucking company’s clients. If a trucking company has some customers that are creditworthy and others that are not, the factoring company can decide to only factor invoices from the creditworthy customer.
Even if a trucking company has some customers with poor credit, they can still factor invoices from customers with good credit.
Owner operators leased onto a motor carrier are not eligible for factoring because they are not directly invoicing brokers and shippers.
To create our list of the best truck factoring companies, we researched the largest players in the space, smaller firms, and newer tech-focused companies that are making a name for themselves.
We compared factoring companies along the following dimensions:
Put simply, a recourse factoring agreement requires trucking companies to repurchase unpaid invoices if their customers don’t pay the factoring company after a set period of time.
While non-recourse implies that a trucking company removes all risk of non-payment, it’s usually not that simple. Most non-recourse factoring agreements only cover specific scenarios.
For example, most non-recourse agreements only cover when the customer declares bankruptcy between the original invoice date and due date. If a customer decides not to pay for any other reason, most (but not all) factoring companies will require the trucking company to repurchase the invoice.
Always read the find print to see what scenarios are covered for non-recourse factoring.
Also known as the factor fee or discount rate, this is how much it costs a trucking company to factor an invoice.
In theory, if the factor rate is 3% and a trucking company has an invoice worth $100, they will receive $97 and the factoring company will keep $3. In practice, most factoring companies have additional fees that are associated with each invoice so the total cost of factoring is usually higher.
Additionally, some factors use a flat-fee structure while others use a variable fee structure. Under a variable fee structure, fees depend on how long it takes the customers to pay the invoice.
For example, the factor rate might be 2% for the first 30 days and an additional 1% for each additional 30-day period until the invoice is paid. Under a flat-fee structure, the factor rate would be 2% regardless of when the invoice is paid.
For the reasons covered above, it can be difficult to compare the total cost of factoring from one company to another. However, in general, the best factoring companies offer flat-fee invoices with few (if any) additional fees.
It’s not uncommon for factoring companies to advertise a low factor rate but to make up for it with additional fees. These fees can include but aren’t limited to:
As mentioned above, the best companies usually don’t have many “extra” fees on top of the factor rate.
Some factors only advance a percentage of the total amount the trucking company will receive. For example, if a trucking company factors a $100 invoice with a 3% factor rate and a 90% advance rate, the trucking company would receive $97. However, they would only receive $87.30 immediately and the remaining $9.70 once the invoice is paid.
The best factoring companies have 100% advance rates so truckers get paid everything upfront.
How quickly a trucking company gets paid will depend on:
It’s also worth asking if invoices are approved on nights, weekends, and holidays. Unfortunately, most invoices cannot be paid on nights, weekends, or holidays even if the invoices is approved but some companies have proprietary payment systems that enable trucking companies to access their money 24/7.
Some companies charge fees for instant access to funds while others offer this service for free.
Unfortunately, it’s not uncommon for truckers to get locked into long term contracts that include an early termination fee that can be thousands to tens-of-thousands of dollars.
In general, it’s best to avoid any factoring company that has a contract longer than a year. A few of the factoring companies we recommend require no contract and trucking companies can leave at anytime.
In addition to basic invoice factoring, some factors also offer products and services like load boards, fuel cards, fuel advances for booked loads, or lines of credit. Some also have their own mobile app to make submitting invoices as simple as possible. While these extras can be nice, it’s not recommended to choose a factoring company purely based on these.
A Uniform Commercial Code (UCC) filing allows creditors to check whether a company has pledged their assets as collateral to another third party. This prevents a company from using the same asset to secure multiple loans. Nearly all factoring companies will require a UCC filing for a company’s accounts receivable. However, some companies try to place a blanket UCC filing that covers all of the company’s assets.
It’s best to restrict the UCC filing to just the accounts receivable to maintain flexibility for other types of financing.
Thunder Funding is fast-growing factoring company that exclusively focuses on funding solutions for motor carriers.
The main advantage of Thunder Funding is that they do not lock carriers into longterm contracts. Instead, they use 90-day contracts with no termination fees once the contract period is complete.
Thunder Funding offers competitive rates for non-recourse factoring but their non-recourse program is slightly more restrictive other companies on our list. They only cover invoices from brokers that become insolvent after a load has been delivered. If the broker is slow to pay or refuses to pay for other reasons, trucking companies are on the hook.
OTR Solutions, formally known as OTR Capital, is one of the only large factoring companies that has great user reviews. The company offers both recourse and non-recourse factoring, which provides more protection than most other factors. While most non-recourse programs only cover invoices from a broker or shipper that goes out of business, OTR's program covers all invoices that have proof of delivery without issue. So if a customer is late to pay or withholds funds for other reasons, trucking companies aren't typically on the hook.
From a pricing perspective, OTR offers competitive rates with non-recourse factoring starting at 3% for a one-truck company (larger trucking companies will have a lower rate). While OTR does charge for ACH transfers, their fees are lower than most other factors that charge for ACH transfers (only $3 vs $10). Outside of the ACH fee, most trucking companies will not incur any additional fees as there are no monthly minimums, invoice processing fees, etc. However, OTR does offer instant access to funds via their BOLT program for $25 for companies in need of quick cash.
The only downside to OTR is that after a 90-day trial period, they require an annual contract. However, the trial period combined with the wide range of free features and services makes OTR a great choice for companies.
Haulpay is the factoring arm of Comfreight, a freight-tech company most known for it's load board product. The company offers a true non-recourse factoring program which covers all invoices as long as there is proof of delivery without issue. So even if a broker or shipper let's an invoice go past due for few months, trucking companies aren't on the hook.
From a pricing perspective, Haulpay offers competitive rates inline with most non-recourse factoring options but they set themselves apart by not requiring longterm contracts and having no other fees, not even for ACH transfers. Not paying for ACH transfers can save trucking companies hundreds of dollars each year.
Clients can also access the Comfreight load board product for free.
Rather than a traditional for-profit company, Transport Clearing East (TCE) is a co-op where all factoring clients are also members. As a not-for-profit company, TCE is able to offer low rates as well as annual dividends where members receive a percentage of the profit based on how much the amount they factored over the year.
The biggest drawback to TCE for most trucking companies is that they only offer recourse factoring, meaning any invoices that are unpaid after 90 days must be repurchased.
Factoring rates will vary with interest rates but a good rate is usually 1-3%. However, it’s important to note that some factors charge additional fees so the total cost of factoring may be higher.
The factoring fee is deducted from the invoice’s total amount and is therefore paid by the trucking company or owner operator. For instance, if the factoring rate is 3% on an invoice value of $10,000 (and no other fees apply), the trucking business can expect to receive a total of $9,700 (adding up the advance amount and the rebate).
Yes, factoring fees are tax deductible. For more information on specific scenarios, it is advisable to talk to a tax consultant.
After submitting the signed invoice (which can be faster if the factor offers an online portal or mobile app to send invoices), the factoring company will need to approve the invoice for purchasing. Once that’s done, the advance funds will be deposited in the trucking company’s account via ACH (overnight), wire transfer (within an hour), or on a fuel card (instantly). On average, getting access to funds takes around 24 hours.
Factoring companies run credit checks on the customers of the trucking company or owner operator to assess their risks and creditworthiness, but not the trucking business itself.
For some transportation companies and owner operators, freight factoring is a great option as it helps provide working capital by bridging through the gaps in cash flow that 30-90 day payout periods can mean. Especially for smaller trucking businesses experiencing fast growth, factoring can help cover daily operating expenses without incurring debt.