Truck Factoring: What You Need to Know

December 18, 2023

What is Truck Factoring?

Truck factoring is a way for truckers to receive payments much faster for their provided services. Contrary to the factoring company that deals with invoice payment processing and collection. In exchange for this service, the truck driver needs to give a small percentage of the invoice to the factoring company. Moreover, the factoring companies charge additional fees for their services which reduces the amount a driver earns on that load. 

What is Factoring in Trucking?

Factoring is a process where the driver sells the invoices of loads to a company specialized in collecting and processing the received accounts. Mostly, the factoring company pays the complete earnings of the load in a few days and also charges an extra fee of some amount for the sake of providing the service. The completion of this entire part sets free the hands of the driver from the invoices and the company solely has to deal with the collection of invoices. Truck Factoring Company leaves the driver with money in his pocket, and he gets rid of the collection of invoices. 

Different Types of Factoring in the Trucking Business:

The decision of factoring leaves the owner-operator with two choices either choose recourse factoring or non-recourse factoring. The two types of factoring are there and the truckers pick any one of the two by keeping in mind the potential profit and loss each brings with it to the trucker’s trucking business. This is a keen choice to be made by the owner-operator as profits of a trucking business are on stakes when deciding factoring. 

All the two kinds of factoring are mentioned below. 

  • Recourse Factoring

Companies offering recourse factoring take a lower percentage cut leaving the trucker with more money in the pocket. However, there is a catch, if the company is unable to collect payment from the trucker's customer, the company asks the trucker to purchase back the invoice. This type of factoring leaves an owner-operator in a bad situation if the company is unable to collect invoices, the trucker is left unpaid for those particular loads for an unknown period. 

  • Non-recourse Factoring 

In contrast, this type of factoring is a good one for the owner-operator. As in this factoring, if the customer does not pay, the company does not ask the owner-operator to repay the invoice. Again, there is a price to pay, as in this type of factoring, the factoring company charges a larger percentage of the money, leaving the trucker with less profit compared to recourse factoring. 

What is a Factoring/ Freight Company in Trucking?

Factoring companies, also known as freight companies in trucking, are the companies that give cash to trucking companies in exchange for outstanding invoices. These are of great help to the truckers as they do not have to wait for 30, 60, or 90 days to get the money in their pockets. The trucking business requires the truckers to have money in their pockets all the time to meet fueling needs, etc. Apart from this, the freight factoring companies are of great support to the trucking companies and owner-operators when they don't have staff to manage invoicing and collection. The factoring companies enable the trucking business to run smoothly without any hurdles due to a lack of money in its pocket. However, the owner-operator or trucking companies should be cautious about the potentially unclear costs and contracts. 

Steps of the Factoring Process:

1. Firstly, the owner-operator or trucking company begins factoring with a factoring company.

2. The factoring company provides notification to its customers about factoring arrangements. However, most customers already know about the arrangements as this is quite common in the trucking industry. 

3. The driver transports the supplies for the customer, and after making the delivery the driver receives a signed invoice. 

4. A copy of the invoice is sent by the driver to the factoring company.

5. The factoring company verifies the invoice, ensuring that the load has been delivered per the contract terms.

6. Following this, the factoring company advances the driver a percentage of the value of the invoice within a few days.

7. The driver receives up to 98% of the invoice's value. 

8. The factoring company then deals with the billing process and collects the payment from the customer.

Is There a Need for Factoring for a Successful Trucking Business?

The trucking business can be run perfectly without the services of a factoring company. However, the owner-operator or the trucking company will then have to plan for lengthy waiting times to get paid by the customers. So, in conclusion, factoring is a quality upgrade for which the owner-operator pays a certain amount of cost to run the business more efficiently. 

Qualification For Factoring:

Factoring in the trucking business is a normal business procedure. Qualification for factoring is an easy and quite straightforward procedure. For factoring, one should own a trucking company; this includes working as an owner-operator, and one should be providing the services to the customers with good credit. Approval for factoring is based on the customer's credit rating, as they are the party making payment. 

For instance, if the customer does not qualify for factoring, then it's upon the owner-operator to make other payment arrangements or decline to provide service to them. Thus, factoring works as a protection for you, as the last thing an owner-operator would do is deliver to the customer who does not pay on time, and factoring saves you from this. 


Summation of all the points leads to the conclusion that factoring in the trucking business is one of the great updates for owner-operators. The process of factoring accompanies a handful of advantages with its self for the trucking business. Through factoring, a streamlined trucking business is operated as the owner always has cash in pocket to meet the business needs. By choosing factoring, the trucker comes to know the nature of its customer, whether the customer is the one who will make payments on time or will delay them, this is of great support to the trucking company in choosing the right customer for them. Apart from this, the owner-operator can stay compliant with the need to meet the business requirements and manage the bills without the need to hire staff to look after the bills. There is no doubt that trucking businesses can be run perfectly fine without factoring but it is undeniable that paying a small cost to get a feature like factoring only brings efficiency and smoothness in the trucking business. All these advantages of factoring boost the trucking business and enable owner-operators to make huge profits. Hence, this amazing trucking management tool called “Factoring” in the trucking business provides immense support at the price of little cash.

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