Why the quoted rate is not the real cost
A FreightWaves explainer on the cost of factoring puts typical factoring rates at 1% to 5% of each invoice. On top of that rate, many agreements add some combination of transfer fees, per-invoice charges, monthly minimums, fuel advance fees, credit check fees and termination penalties. A lower rate with a fee on every wire and a monthly minimum can easily cost more than a higher rate with none of them.
For a quick refresher: a factor buys your delivered-load invoices, advances most of the value now, and pays you the rest (the reserve) minus its fee when the broker pays. FreightWaves says advances commonly run 90% to 97% of the invoice in its non-recourse explainer. With recourse factoring you buy back an invoice the broker does not pay; with non-recourse the factor absorbs the loss, but usually only if the broker fails for a credit reason. Our recourse vs. non-recourse guide covers that distinction in detail.
Few factors publish full fee schedules. Where we give a figure below, it comes from a page that does. Everything else is described by what to look for, because amounts vary by provider and by contract.
Fees when you sign up
Application or setup fees
Some factors charge to open an account. Others do not: MJN Services, for example, lists no application or setup fee on its rate page.
Contract wording to search for: "application fee," "setup fee," "account establishment fee," "onboarding fee."
What to do: ask for it to be waived, especially if you are bringing steady volume.
Credit check fees
Before funding, the factor checks the credit of each broker you haul for. Some pass that cost to you; FreightWaves uses a $15 credit check fee in one of its worked examples, while MJN Services lists no fee to run credit on your customers.
Contract wording: "credit check fee," "credit verification fee," "customer approval fee."
What to do: ask whether broker credit checks are free and unlimited. You should be running one before every new broker, so a per-check fee adds up.
Minimum volume requirements
Not strictly a fee, but it costs money when you fall short. Some contracts require you to factor a minimum amount each month and charge a fee if you do not. MJN Services, for example, sets a $200 monthly minimum fee that applies after 90 days and is waived in months when your calculated fees exceed it. Bobtail advertises no monthly minimums on its home page, and Triumph advertises none on its factoring page.
Contract wording: "monthly minimum," "volume requirement," "minimum factoring volume," "minimum volume fee."
What to do: choose a contract with no minimum, or one well below your slowest month. A truck in the shop or a seasonal lull is exactly when a minimum bites.
Advance rate changes
The advance rate is the share of the invoice you receive up front. As an example, a $1,000 invoice at a 90% advance pays $900 now. Some agreements let the factor lower the advance for particular brokers or after problems on your account.
Contract wording: "advance rate adjustment," "risk-based advance," "variable advance rate."
What to do: get the advance rate in writing, along with every condition that allows it to change.
Fees during the relationship
The base factoring fee
This is the main charge, a percentage of each invoice. As an example, 3% on a $1,000 invoice is $30. It is not hidden, but its structure can be:
- Rates quoted per period. A rate of 1% per 10 days on an invoice that takes 30 days to pay costs 3%, not 1%.
- Tiered pricing. The percentage climbs the longer the invoice is open. FreightWaves gives an example of 1.5% for the first 30 days plus 0.5% for every additional 10 days.
Contract wording: "per 10 days," "per 15 days," "per 30 days," "escalating rate," "tiered pricing."
What to do: ask for the rate at 30, 45 and 60 days and price it against your own payment history. Our freight factoring cost guide shows the math.
ACH and wire transfer fees
Many factors charge each time they send you money, especially by wire. FreightWaves uses a $10 ACH fee and a $20 wire fee in its worked examples. Others charge nothing: MJN Services lists no ACH fee, and Bobtail advertises same-day pay at no extra charge.
Contract wording: "ACH fee," "wire fee," "payment processing fee," "disbursement fee."
What to do: count how often you fund. As an example, 20 wires a month at $20 is $400, which on $40,000 of volume adds a full percentage point to your rate.
Monthly service fees
Some factors charge a flat monthly fee to keep the account open, like a bank maintenance fee. FreightWaves uses a $50 monthly fee in one of its worked examples.
Contract wording: "monthly service fee," "account maintenance fee," "administrative fee."
What to do: ask for it to be waived or choose a factor that does not charge one.
Invoice processing fees
On top of the percentage, some factors charge a flat amount for each invoice submitted. FreightWaves lists invoice processing among the common add-on fees; MJN Services lists no per-invoice fee.
Contract wording: "invoice processing fee," "handling fee," "document fee," "schedule fee."
What to do: multiply the fee by your monthly load count before comparing offers.
Fuel advance fees
Many freight factors will advance part of a load at pickup so you can fuel before delivery. Thunder Funding, for example, advertises up to 50% of the load amount within 15 minutes of loading on its fuel advance page and promotes it as free. Other factors charge a separate fee or a higher rate on the advanced portion.
Contract wording: "fuel advance fee," "quick pay fee," "expedited funding fee."
What to do: ask what the advance costs, how it is repaid, and what happens if the load is cancelled. Our fuel card and fuel advance comparison goes further.
Reserve terms
Most factors hold back part of each invoice until the broker pays. FreightWaves puts typical reserves at 5% to 20%. Triumph advertises no reserves. The reserve is your money, and the fees and chargebacks a factor can deduct from it before releasing it matter more than the percentage.
Contract wording: "reserve," "reserve release," "reserve management fee," "offset."
What to do: ask how often reserves are released, what can be deducted from them, and whether they earn anything while held.
Technology or portal fees
Some factors charge for their app or online portal.
Contract wording: "technology fee," "portal access fee," "software fee."
What to do: treat app access as part of the service. Most factors include it.
Aging or late payment fees
If a broker pays slowly, some agreements add fees on top of the base rate, separate from a tiered rate.
Contract wording: "aging fee," "late payment fee," "extended terms fee."
What to do: if your brokers often pay past 30 days, price this against your aging report before signing.
Verification fees
Some factors charge to verify loads or invoices with the broker before funding.
Contract wording: "verification fee," "confirmation fee," "invoice validation fee."
What to do: ask whether verification is included in the rate.
Chargeback fees
Under recourse factoring, you buy back invoices the broker does not pay within the recourse period. eCapital says that period is usually 60 to 90 days on its recourse vs. non-recourse page. Some factors add a fee on top of the repurchase itself.
Contract wording: "chargeback fee," "recourse fee," "repurchase fee."
What to do: ask whether fees keep accruing on an invoice until it is charged back, and whether there is any charge beyond the original fee.
Fees when you leave
Early termination fees
Many contracts set an initial term and charge to leave before it ends, and some renew automatically. FreightWaves reports early termination fees of 3% to 6% of the facility limit in some agreements. Others keep the exit easy: Bobtail lets new clients cancel without penalty in the first 90 days on its factoring page, and Thunder Funding says on its home page that it does not require long-term commitments.
Contract wording: "early termination fee," "cancellation fee," "liquidated damages," "automatic renewal," "evergreen."
What to do: know the term, the notice period and the exact fee before you sign.
Buyout and transfer fees
When you switch factors, the new factor usually pays off what you owe the old one on open invoices. Some agreements charge a fee for that payoff or for releasing your accounts.
Contract wording: "buyout fee," "transfer fee," "exit fee," "payoff fee."
What to do: read the exit process before you sign. Our guide to switching factoring companies walks through the steps.
Account closing fees
Some factors charge to close the account, run a final reconciliation or return records.
Contract wording: "account closing fee," "final audit fee," "reconciliation fee," "document return fee."
What to do: ask what closing the account costs, in writing, before you open it.
How the fees add up: an example
Here is a hypothetical $5,000 invoice.
What you think you are paying
- Invoice: $5,000
- Factoring rate: 3%
- Expected cost: $150
What you might actually pay
- Factoring rate at 3%: $150
- Invoice processing fee: $15
- ACH transfer fee: $10
- Share of a monthly service fee: $25
- Aging fee because the broker paid after 30 days: $50
- Actual cost: $250
In this example the real cost is two-thirds higher than the quoted one. Across a year of loads, that difference runs to thousands of dollars.
How to protect yourself
- Read the whole contract. The fee schedule is often an exhibit at the back. Our guide on how to read a factoring contract shows where to look.
- Ask for the complete fee schedule in writing. Reluctance to provide one is a red flag.
- Get waivers in writing. A verbal promise does not help when the statement arrives.
- Compare at least three offers on the same basis: your load count, average invoice and broker mix. You can request quotes to get several at once.
- Talk to other carriers about how statements compared with what they were sold.
- Negotiate. Transfer fees, minimums and term length are often negotiable.
- Compare total monthly cost, not the rate. Run each offer through the factoring calculator.