What is factoring in trucking? One load, start to finish
Factoring sounds complicated until you follow one load through it. Below is an EXAMPLE two-stop load from the rate con to the advance to the broker's payment, with what you do, what the factor does, and what changes for the broker.
Monthly invoices
See my factoring rateWe refer carriers to a factoring partner and may be paid for referrals.
The example: a hotshot hauls a two-stop partial for $1,450. The broker pays in 35 days. The carrier factors it at a 3% flat fee with a 95% advance. On day one, the carrier gets most of the money. On day 35, the broker pays the factor, and the reserve comes back minus the fee. Nothing about the load itself changes: the carrier still approved it, signed the rate con and delivered it.
EXAMPLE
- Invoice
- $1,450
- Advance 95%, day 1
- $1,378
- Fee 3%
- -$44
- Reserve, day 35
- $29
The notice of assignment
When you start factoring, the factor sends each broker you haul for a notice of assignment, or NOA. It tells the broker that your invoices now belong to the factor and must be paid to the factor's account. After that, a broker who pays you directly hasn't paid the invoice, so keep the NOA current with every broker you work with.
Before funding, most factors verify the load: they confirm with the broker that it delivered and that the amount is right. Verification is why clean paperwork matters. A blurry BOL or a missing signature is the most common reason an advance gets held.
What the broker sees
Switch between your side and the broker's side of the same five steps. For the broker, factoring changes only one thing: where the money goes.
- STEP 1
Haul the EXAMPLE load: 2 stops, $1,450
- STEP 2
Send the factor the signed rate con, BOL and invoice
- STEP 3
Factor calls to verify the load
- STEP 4
Advance lands, often next business day
- STEP 5
Reserve released when the broker pays, minus the fee
EXAMPLE flow. Exact steps and timing depend on your factor and broker.
Who carries the risk
With recourse factoring, you carry the risk: if the broker never pays, the advance comes back out of your account after the recourse period. With non-recourse, the factor absorbs the loss in the cases the agreement names, most often a broker going out of business. Load disputes, like damage or shortage claims, are usually your problem either way. Non-recourse often costs a little more. The full comparison is on non-recourse factoring.
What you send for each load
| Document | Why the factor needs it |
|---|---|
| Signed rate confirmation | Proves the agreed rate and broker |
| Signed BOL or proof of delivery | Proves the load delivered; one per stop |
| Your invoice | The amount being sold to the factor |
| Lumper or scale receipts | Only when they're billed to the broker |
Most factors take clear phone photos through an app or email. Send them the day you deliver; the sooner they arrive, the sooner the advance does.
How long each step takes
- 01Setup. Usually a few days: application, authority and insurance checks, agreement, NOAs to your brokers. EXAMPLE timing.
- 02Upload to verification. Often the same day, when the broker answers quickly.
- 03Verification to advance. Many factors fund within one business day; same-day funding is sometimes offered for a fee.
- 04Broker payment. The broker's normal terms, often 30 to 45 days.
- 05Reserve release. When the broker pays, per your agreement.
Why an advance gets held
Missing signatures
A BOL or delivery receipt without the receiver's signature, or one stop missing on a multi-stop load.
Unreadable photos
Blurry, cropped or dark pictures the factor can't verify. Shoot flat, in good light, all corners in frame.
Amount mismatch
An invoice that doesn't match the rate con, often because an accessorial wasn't added to the rate con in writing.
Broker hasn't confirmed
The factor can't reach the broker to verify delivery. Late-day uploads often wait until the next morning.
NOA not on file
A new broker that hasn't received your notice of assignment yet. Send it before the first load with them.
Claims on the load
Damage, shortage or late-delivery complaints. Those are settled before the factor pays.
How dispatch fits in
A dispatcher doesn't change any of this. You still approve every load, and the rate con still comes straight to you; it's one of the documents your factor will ask for. What a dispatcher can do is make sure brokers have your NOA and help you put the paperwork together. See dispatch and factoring together, or go back to the freight factoring overview.
How factoring works: FAQ
Q01What does factoring mean in trucking?
Selling your unpaid load invoices to a factoring company. The factor pays you most of the invoice right away, collects from the broker on the broker's normal terms, and keeps a fee.
Q02What is a factoring reserve?
The part of the invoice the factor holds back when it pays your advance. When the broker pays the factor, the reserve is released to you, minus the fee. Ask how long it can be held.
Q03What is an NOA?
A notice of assignment: a letter telling a broker that your invoices are assigned to a factor and should be paid to the factor. Once a broker has it, paying you directly doesn't settle the invoice.
Q04What happens if the broker pays late?
On a flat-fee agreement, usually nothing changes for you. On a tiered agreement, the fee can rise the longer the broker takes. On recourse factoring, if the broker hasn't paid by the end of the recourse period, the advance may be charged back to you.
Q05Who collects from the broker?
The factor. It follows up with the broker for payment, which is part of what the fee pays for. You may still be asked for documents if the broker raises a question about the load.
Q06Can I factor a load with two stops?
Yes. Send the rate con and signed delivery receipts for every stop. Missing one signature is a common reason funding gets held.
Q07Do I factor every load?
Depends on the agreement. Some factors let you pick loads one at a time; others require all invoices from a broker, or all your invoices. Read the clause before signing if you want to keep some loads unfactored.
Q08What does the factor check about me?
Usually your authority status, insurance, safety record and any tax liens, and sometimes your personal credit. The bigger check is on your brokers, since they're the ones paying.
Q09How long does factoring take?
Setting up with a factor usually takes a few days of paperwork and checks. After that, many factors fund within a business day of clean paperwork. Exact timing is in your factor's terms.
Q10Do I still deal with the broker after factoring?
Yes, for the load itself: appointments, check calls, detention and any questions about delivery. The factor only handles the payment side. If the broker disputes the invoice, you'll usually be asked to help sort it out.
Q11What if a broker pays me instead of the factor?
Send the payment on to the factor, or tell the factor right away so it can be applied. Once a broker has your notice of assignment, paying you directly doesn't settle the invoice, so it's best sorted out the same day.
We refer carriers to a factoring partner and may be paid for referrals.