What Is Freight Factoring? Everything You Need To Know

Freight factoring is when carriers sell an invoice to a factoring company in exchange for faster payment at a small discount.

As we’ve already answered the primary question, we only think it’s fitting to cover why freight factoring is important to trucking business owners.

Ready? Let’s dive in.

The Primary Types of Freight Factoring

There are two real solutions that many consider, these are: recourse factoring and non-recourse factoring. 

We say there are only two “real” factoring solutions because there are other solutions that offer similar things to factoring such as QuickPay, however, more often than not, these alternative solutions are not worth the time and effort and may even cost you more in the long run.

Recourse Freight Factoring

In recourse freight factoring, the carrier assumes the risk in the event of a non-paying customer, even if it’s not the carrier’s fault.

Non-Recourse Freight Factoring

Non-recourse freight factoring is the opposite of recourse factoring because of its added protection for the carrier. In non-recourse freight factoring, the factoring company assumes the risk of non-paying customers. There is typically a reduced need to pay the factor back, however, due to the risk exchange, non-recourse freight factoring may have higher fees than recourse freight factoring, though, for good reason.

What is The “Best” Freight Factoring Company?

We aren’t here to be biased, but we are here to help you find the best path for your business. 

Objectively, determining the best freight factoring company will ultimately be for you to decide.

These are a few variables that you should consider when finding the best factoring company for you:

• Fees
• Contract length
• Payment schedule
• Partnerships
• Internal tools
• Risk assumption
• Client Support

Fees

When choosing a factoring company, transparency is key. Many factors advertise low rates, but hidden fees in the fine print can quickly add up and disrupt your cash flow. Be sure to thoroughly review the terms of your contract and ask about additional charges like invoice processing, ACH transfers, or early termination penalties. Partnering with a trustworthy and reliable factor ensures there are no surprises—just straightforward, honest rates that align with your business needs.

Contract Length

Many factoring companies do have a contract length (also known as a commitment). Most factoring companies offer a 6-month, 12-month and 24-month contract length and a select few offer no contract length at all.

Payment Schedule

If you’re factoring your invoices, it should be a huge consideration on how quickly you’ll receive your funds.

Most factoring companies release payments within 3-4 business days. There are also several factoring companies that release payments the next day or even the same day, such as us at OTR Solutions.

Customer Service

A reliable factoring partner is defined by its commitment to exceptional customer support. At OTR Solutions, we provide you with a consistent account management team trained to assist in every scenario, from navigating accounts receivable to resolving complex issues.

When you call, you’ll always speak to a real person—no frustrating automated voice messages or endless hold times. Our dedicated support team is available to answer your questions promptly, ensuring you stay on top of your cash flow and maintain smooth operations. With OTR Solutions, you have a partner who’s always there when you need them, ready to provide the support and expertise you deserve.

Partnerships

Another key variable to consider is if the factoring company offers unique partnerships with third-party vendors. Many partnerships open your business to more resources to further help your cash flow. 

For example, OTR Solutions offers partnerships with industry-leading brands such as DAT, Simplex and FreightCaviar which give truckers a discounted rate on their load board.

Internal Tools

Factoring your freight is a sure-fire way to secure your cash flow, but what other methods can you employ to grow that precious cash flow that much further? Many freight factoring companies offer a subset of internal tools or solutions to help you with your operations and finances. 

Let’s look over a few of the key tools and services that we at OTR Solutions offer all of our factoring clients: 

• Fuel advances 
• Lumper fee advances
• Fuel Finder
• BASICs score monitoring 
• Dedicated operations & accounts receivable team
• 24/7 free broker checks

Many freight-exclusive factoring companies offer tools and solutions, but it’s crucial to choose one that provides extra features aligning with your long-term goals—preferably tools you can integrate with immediately.

Risk Assumption

The last variable you should strongly consider is the risk assumption model that the factor operates under. As a quick reminder, there are two types of freight factoring: 

• Non-recourse
• Recourse

In non-recourse factoring, the factor assumes the risk. In recourse factoring, the carrier assumes the risk. 

Get Started with The Only True Non-Recourse Freight Factoring Solution

Powered by years of industry expertise, we at OTR Solutions are dedicated to providing carriers with the best non-recourse factoring solution. Get started with OTR Solutions today and factor with us and secure your cash flow and scale with our subset of tools tailored for truckers.

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