What Freight Factoring Actually Costs

The short answer

Freight factoring is priced as a percentage of each invoice. A FreightWaves explainer on the cost of factoring puts typical rates at 1% to 5% of each invoice. As an example, on a $2,000 load at 3% the fee is $60 to get paid now instead of when the broker pays.

The rate you are quoted is often not what you end up paying. Transfer fees, per-invoice charges, monthly minimums and termination penalties can add a point or more to your real cost, and none of them appear in the number a salesperson leads with. This guide goes through the full bill so you can work out the cost for your own operation before you sign.

What moves your rate

Monthly volume. Factors have fixed costs per account, so larger, steadier volume usually earns a lower percentage. A one-truck operation should expect to pay more per invoice than a fleet factoring the same brokers at several times the volume.

Recourse or non-recourse. Non-recourse costs more because the factor absorbs the loss if an approved broker fails for a credit reason. FreightWaves estimates the non-recourse premium at 0.5% to 1.5% added to the rate in its cost explainer. As our recourse vs. non-recourse guide explains, non-recourse covers less than most carriers assume.

Who your brokers are. The factor is underwriting the credit of the brokers who owe you, not yours. A book of loads from established, fast-paying brokers prices better than one full of new authorities and slow payers.

How fast invoices get paid. On a tiered rate this matters a great deal, as the next section shows.

Flat rate versus tiered rate

This is the most important structural choice in a factoring agreement, and the one that most often surprises carriers.

A flat rate charges the same percentage regardless of when the invoice is paid, within a set window. MJN Services, for example, publishes a 3% flat rate fixed for 60 days on its rate page.

A tiered or variable rate starts lower and climbs the longer the invoice stays open. MJN lists a 1.5% variable rate that adjusts with shipper payment timing on the same page. FreightWaves gives a tiered example of 1.5% for the first 30 days plus 0.5% for every additional 10 days.

Here is a hypothetical comparison on a $2,000 invoice, using a tier of 1% for the first 30 days plus 0.3% for each 10 days (or part) after that, against a 3% flat rate:

On those numbers the tiered rate wins comfortably. Tiered structures vary a lot, though, and some climb much faster, such as a full percentage point per 15 days. Under a steep tier, a slow-paying broker can cost you more than a flat rate would have.

So the question to ask is not "what is your rate." It is "what is my rate at 30, 45 and 60 days, and what does that come to on my actual aging report." A factor that cannot answer quickly is one to be careful with.

Every other fee, and what it costs

The rate is the headline. These are the lines underneath it. Few factors publish full fee schedules, so the examples below come from the pages that do.

Sources for each company: MJN Services rate page, Bobtail, Triumph factoring page, Riviera Finance freight factoring page. Fees change, so confirm every line against the fee schedule in your own agreement.

Transfer fees are the ones that catch people. They look trivial until you count how often you get paid. As an example, a carrier funding every business day on a $20 wire, roughly 20 to 30 transfers a month, spends $400 to $600 a month on transfers alone. On $40,000 of monthly volume that is another 1% to 1.5% on top of the quoted rate, and it never shows up in a rate comparison.

Some factors include free ACH; some charge for every transfer. For a carrier that funds often, that difference can be worth more than half a point of rate.

A worked example

Take a hypothetical carrier running 20 loads a month at $2,000 a load, so $40,000 of monthly invoicing. Two factors each quote what sounds like a competitive rate.

Company A: 3% flat, free ACH, no minimum

• Factoring fee: $40,000 x 3% = $1,200
• Transfer fees: $0
• Monthly total: $1,200, an effective rate of 3.0%

Company B: 2% flat, $20 per wire, $1 per invoice, $500 monthly minimum

• Factoring fee: $40,000 x 2% = $800
• Wire fees: 20 loads funded individually = $400
• Invoice processing: 20 x $1 = $20
• Monthly minimum: met, no charge
• Monthly total: $1,220, an effective rate of 3.05%

Company B advertises a rate a third lower than Company A and costs slightly more. The advertised rate on its own tells you very little. Run your own numbers through the factoring calculator using your real average invoice and load count.

How to compare offers

Ask every factor for the same four things and do the arithmetic yourself.

1. The all-in monthly cost on your actual volume. A dollar figure, including transfers, at the number of loads you really run.
2. The rate at 30, 45 and 60 days if the structure is tiered.
3. The complete fee schedule in writing. If it is not in the contract, it is not a commitment.
4. The cost of leaving. Initial term, auto-renewal, notice period and early termination fee.

Then ask one more: what is the minimum I have to factor to avoid a penalty. Minimums are how a good rate becomes a bad deal in a soft freight month. If your volume swings, a minimum can cost more than a higher rate would have. Our guide to hidden fees in factoring lists the contract wording to search for, and how to read a factoring contract covers the rest of the agreement.

What a competitive package looks like

There is no single market price, but published terms give a useful checklist. Treat an offer that falls short on several of these lines as room to negotiate or a reason to keep looking.

• Rate: a flat rate, or a tiered rate that lands near it on your real aging. Bobtail, for instance, advertises a maximum factoring rate of 3.24% on its home page.
• Advance: FreightWaves says advances commonly run 90% to 97% of the invoice in its non-recourse explainer. Riviera Finance advertises a 95% advance on its freight factoring page, and eCapital says it provides up to 100% on its freight factoring page.
• Transfers: ACH included, or wire fees you have priced into the total.
• Contract: a short initial term. MJN Services states a 90-day initial contract period, and Bobtail lets new clients cancel without penalty in the first 90 days on its factoring page.
• Monthly minimum: none, or comfortably below your slowest month.
• Broker credit checks: free and unlimited.

The bottom line

Factoring is not expensive for what it does. Turning a slow receivable into cash this week for a few percent is a reasonable trade when the alternative is turning down loads because the fuel card is empty.

What is expensive is signing on a headline rate without reading the fee schedule. Over a year, the gap between a well-structured agreement and a badly structured one with a lower headline rate can run to thousands of dollars on a small fleet. Compare on total monthly cost, not the percentage on the front page.

What the freight factors we rate publish

Most freight factors quote per carrier and do not publish a rate card. The table below records what each company's own website said when we checked, and marks everything else "Not published." Treat any figure attributed to a named factor, here or anywhere else, as a starting point for your own written quote.

Sources: Riviera Finance, Thunder Funding, eCapital, OTR Solutions, Triumph, RTS Financial. Porter Freight Funding's website blocked our automated check, so its cells are marked not published. For how we assess these companies, see our freight factoring ratings and methodology.

How to get a real number

Ask each company for the all-in cost on a representative month of your freight: average invoice size, monthly volume, broker mix and payment terms. Ask for the rate, every per-transaction fee, the monthly minimum and the termination terms in writing, on one sheet. Three quotes structured that way are worth more than any published range. You can also request quotes from several factors at once.

Frequently asked questions

How much does freight factoring cost?

FreightWaves puts typical rates at 1% to 5% of each invoice. As an example, a $2,000 load at 3% costs $60. Volume, recourse terms and the credit quality of your brokers all move the rate, and transfer fees and minimums can add to it.

What is a good freight factoring rate?

One that stays competitive after fees on your own volume. Compare the all-in monthly cost rather than the headline percentage. A flat or tiered rate with free ACH, no monthly minimum and a short initial term is usually a better deal than a lower headline rate with per-transfer and per-invoice charges.

Is a tiered factoring rate cheaper than a flat rate?

It depends on how fast your brokers pay. Tiered rates start lower but climb with time outstanding. If most of your invoices clear inside 30 days, tiered usually wins. If you carry many 45- and 60-day payers, a flat rate is often cheaper and always more predictable.

What hidden fees do factoring companies charge?

The common ones are ACH and wire transfer fees, per-invoice processing fees, monthly service fees, monthly minimums, credit check fees and early termination fees. FreightWaves uses examples of a $10 ACH fee, a $20 wire fee, a $15 credit check and a $50 monthly fee, and reports termination fees of 3% to 6% of the facility limit in some agreements. Transfer fees are the largest hidden cost for carriers who fund often.

Does non-recourse factoring cost more?

Yes. FreightWaves estimates the premium at 0.5% to 1.5% added to the rate. You are paying to transfer credit risk, but non-recourse generally covers only a broker's insolvency or similar credit failure, not disputes, short pays or paperwork problems.

Can you negotiate freight factoring rates?

Often, particularly on volume, contract length and transfer fees. Factors compete for carriers with clean paperwork and a good broker mix. Two or three written offers on the same basis are the most effective negotiating tool you have.

Do you publish what each factoring company charges?

Only what each company publishes itself. Most freight factors quote per carrier, so for the companies we rate the table above shows the few terms their websites state and marks the rest not published, rather than printing figures we cannot source.