What freight factoring really costs

Factoring sells one thing: time. A broker pays on 30-day terms, a factoring company advances most of the invoice within a day or two, and it keeps a percentage for the wait. Whether that trade is worth making depends on numbers you can work out in a few minutes.

The mistake is treating the fee as a banking detail rather than an operating cost. It comes out of the same load revenue that pays for fuel and tires, so it belongs in your cost per mile alongside them.

How the fee is actually charged

Most agreements quote a percentage of the invoice face value. Some advance the full amount minus the fee; others advance a portion up front and hold a reserve until the broker pays, then release the reserve minus the fee. The reserve structure matters for cash timing even when the headline rate is identical.

Read past the percentage for the items that do not appear in the sales conversation: monthly minimum volume, ACH or wire charges per funding, invoice upload fees, credit-check charges per broker, monthly software or account fees, and the notice period to leave. A low rate attached to a long termination notice is not a low rate.

Recourse and non-recourse are not the same product

Under recourse factoring, if the broker never pays, the invoice comes back to you and you repay the advance. The rate is lower because you kept the credit risk.

Non-recourse costs more and is narrower than it sounds. It typically covers the broker going insolvent — not a broker refusing to pay because of a claim, a rate dispute, a late delivery, or missing paperwork. Those are the disputes that actually happen. Ask which specific events are covered before treating non-recourse as protection against non-payment generally.

Price it per mile

A percentage on an invoice is hard to compare against anything else you track. Converting it to cents per mile puts it next to fuel and maintenance, where it can be judged.

Six cents a mile is not nothing. Run 105,000 miles a year with every load factored at that rate and the fee is roughly $6,600 annually. Whether that is expensive depends entirely on what you would otherwise do while waiting 30 days to be paid.

When the fee earns its keep

Factoring is worth paying for when the alternative is worse. The comparison is not the fee against zero — it is the fee against whatever happens while you wait, which for some operators means turning down work until funds land. Broker quick-pay is worth pricing the same way, since those discounts are sometimes steeper than a factoring rate.

It stops earning its keep when reserves have built up enough to float 30-day terms yourself, or when the fee structure has quietly grown — minimums, per-invoice charges, and credit checks accumulate on statements in a way the headline rate does not show.

Either way, the decision is easier once the fee is a per-mile number you can see. Add it to your cost stack in the cost-per-mile tool and the loads that only worked before the fee become obvious.

Where it fits against a specific load

The fee changes your floor, not just your margin. If your all-in cost is $1.95 per mile and factoring takes six cents, a load at $2.00 per mile is no longer above the line. That is a rate you would have booked without thinking twice.

Work the load the same way you would any other: total miles including deadhead, your true cost, then the fee. The true cost per mile guide covers building the base figure, and setting your minimum acceptable rate puts a profit target on top of it.