Freight University · with Thunder Funding
Factoring: how a small carrier gets paid while the freight bill waits.
A load delivers today. The broker or shipper pays in weeks. Fuel, driver pay and the truck note are due now. Here's how factoring closes that gap, what it really costs, and what to read before you sign anything.
Busy all month, and still short on cash
All right. Here's the problem every small trucking company runs into. You pick up a load today and drop it off tomorrow. You've still got fuel, driver pay and every other bill that keeps the truck rolling. And the money for that load doesn't show up for a long time.
That's how a carrier ends up busy and broke. Factoring is one of the ways a small carrier stays alive while the freight bill waits.
What factoring is
Factoring is selling your freight invoice to a factoring company at a discount. It's not a loan. You don't pay it back the way you'd pay back a loan. You give up part of the invoice to get paid now instead of later.
Two words you'll hear: the advance is the part of the invoice you get paid up front. The reserve is the part they hold back until the customer pays. That reserve is still your money.
Know who's going to pay you before you haul
Most factoring companies check a broker's or shipper's credit before you take the load. That one step keeps a lot of small carriers from hauling for somebody who doesn't pay.
Factoring isn't free money
Know every cost before you sign. Here's one load, worked out. The numbers are made up for teaching. Your real fee comes from your own agreement.
Bottom line, know your cost per mile and your profit per load before you factor. Factoring fees usually run about 1.8% to 3% of each invoice, depending on the company, the services you take, and whether the agreement is recourse or non-recourse.
Read these in the agreement
- The factoring fee, and whether it goes up the longer the customer takes to pay
- Other fees: same-day transfers, fuel advances, monthly minimums, ending the contract early
- How much is held in reserve, and when it's released
- How long the contract runs, and whether you have to factor every invoice
- Any lien the factoring company files on your receivables
Who carries the risk
The biggest choice in any agreement is recourse or non-recourse. It decides who's stuck if a broker or shipper never pays. It gets its own section below.
If the customer never pays, who's stuck with it?
Here's the question that matters most in a factoring agreement. You haul the load. The factoring company pays you. Then the broker never pays the bill. Somebody's going to eat that invoice. Recourse and non-recourse decide who.
Recourse
If the customer doesn't pay, the risk comes back to you. You buy the invoice back, or the factoring company takes it out of your future payments or your reserve.
- Usually the lower fee
- The agreement sets how long they'll wait before it comes back to you. Find that number
- You carry the credit risk, so the credit check before every load matters even more
Non-recourse
The factoring company takes the loss if the customer can't pay, but only for the reasons the contract names. That's often just the customer going bankrupt or being documented as unable to pay.
- Usually costs a bit more
- It doesn't cover everything. A dispute over the load, damage, a shortage or missing paperwork can still come back to you
- Read the exact words that say what's covered and what isn't
How to decide
There's no one right answer for every carrier. Invoke your thinking and answer these straight:
- Could you cover a buyback? If one unpaid invoice would sink you this month, moving that risk with non-recourse may be worth the higher fee.
- What does non-recourse really cover? If it only covers bankruptcy, ask yourself how often that's the reason a broker doesn't pay you.
- What's the difference in fee, on your real loads? Work it out in dollars per month against your profit, not just in percent.
- How long before recourse kicks in? More days gives the factoring company more time to collect before it comes back to you.
- Who are you hauling for? If every broker and shipper is credit-checked and approved before you book, you're carrying less risk either way.
Ask Thunder Funding which they offer and exactly what it covers before you sign. This is education, not financial or legal advice.
How it runs, load after load
Clean paper every time
No proof, no pay. Send the signed rate con, the signed bill of lading and the invoice, complete and on time. Missing signatures and wrong numbers are what slow a payment down.
The notice of assignment
When you factor, the broker gets a notice of assignment. It tells the broker to pay the factoring company, not you. That's how the factoring company gets paid back for the money it already sent you.
Fuel cards and fuel advances
Not every carrier has credit with a fuel card company. Some carriers live on fuel advances from brokers, and they pay a percentage every time. A fuel card through your factoring company can change who you're able to work with.
Keep everybody talking
If a load has a problem, tell your factoring company early. They're collecting on that invoice, so they need to know what the broker knows.
What your factoring company expects on every load
Listen. Thunder can only fund what it can read and check. Missing paperwork, a missing signature or a blurry picture, and your funding gets delayed. The truck already did the work. Don't let the paper hold up the money.
The packet, every load
- The signed rate confirmation from the broker
- The bill of lading, signed at pickup and signed at delivery, with the date
- Your invoice, with the same load number, the same rate and the same broker as the rate con
- Any receipts the broker agreed to pay back, like a lumper receipt, with the approval
Signatures
- The driver signs and dates the bill of lading
- The receiver signs at delivery, with a printed name
- Any shortage, damage or over count is written on the bill of lading at the dock, before anybody signs
- A bill of lading with no receiver signature is not proof of delivery
Clean pictures of the paper
- Use a scanning app, not a quick photo
- Paper flat, good light, no shadows, no fingers in the shot
- All four corners of the page showing
- Every page, every stamp and every signature readable
- One load per submission, named so anybody can find it
Every driver on the system
- Get every driver set up on your account before they run a load
- A driver who isn't on the system can delay the pay and slow the whole funding process down
- Add a new driver the day they're hired, not the day their first load delivers
- When a driver leaves, update the account the same day
Before you hit submit
- Load number matches on the rate con, the bill of lading and the invoice
- The rate on the invoice matches the rate con
- It's going to the right broker, at the right billing address
- Nothing is cut off, upside down or blurry
- Submit the same day the load delivers
This is the Freight University clean-funding standard for our carriers. Your factoring company's agreement tells you exactly what it requires. Read it, and follow it.
Clean funding is a team habit
The money on a load gets made or lost at the dock, not at the desk. So everybody who touches the paper needs to know their part. Here's how we teach it.
Drivers
- Read the bill of lading before you sign it
- Get the receiver's signature and printed name before you pull out
- Write any shortage or damage on the paper at the dock
- Scan the signed paper before you leave the receiver, and send it in
- Keep the originals clean, dry and together
Dispatch and office staff
- Run the credit check before you book. Not approved? Don't move the load
- Check every packet against the rate con before it's submitted
- Send it back to the driver the same day if anything is missing or blurry
- Submit the day the load delivers
- Keep a list of anything waiting on paper, and work it every morning
The owner
- Once a week, look at what's funded, what's waiting and why
- Find the reason a load got held up, and fix the habit, not just the load
- Make sure every driver is on the system before they're dispatched
- Make clean paperwork part of training every new driver and every new hire
Bottom line
A clean packet, sent the same day, gets funded. A messy one waits. Train it until it's how your company does every load, every time.
Switching factors: how a buyout works
Some factoring companies charge an exit fee to release you. Here's how Thunder Funding told us they handle a carrier coming over from another factor:
- If you've been factoring with the old company, you can pay their release fee directly, from money they're holding for you or out of your own pocket.
- Or Thunder buys out the old factor. You submit your first invoice to Thunder. Thunder works out the buyout with the old factor, with you copied on the email.
- Thunder pays the release fee, gets the release, and funds your invoice minus the buyout and the factoring fee.
- That first invoice has to be bigger than the buyout amount.
Exit fees are different at every company. Read the termination section of any agreement before you sign it.
Questions to ask any factoring company
- What's the fee, and does it change based on how long the customer takes to pay?
- Is it recourse or non-recourse, and exactly when does recourse apply?
- How much do you hold in reserve, and when is it released?
- Are there monthly minimums, extra fees or charges for ending the contract early?
- Do I have to factor every invoice?
- How fast is the money sent, and what does same-day funding cost?
In the course
Factoring and Clean Funding, the full study
About eleven minutes of teaching, plus Rosa's papers to work: the credit check, two offers side by side, a held-up packet and a buyout.
Get set up with Thunder Funding
Thunder Funding is the factoring partner of Freight University. They describe their service like this:
- Same-day invoice funding
- Short-term contracts
- Back-office support
- Free broker and shipper credit checks
- A fuel card
Ask them about their rates and terms directly, and use the questions above.
Get set up with Thunder FundingTell them Freight University sent you.
Thunder Funding sponsors Freight University. We recommend a factoring company because it fits the carrier, not because of a sponsorship, and you should compare before you choose. This page is education, not financial or legal advice. Read every agreement before you sign it, and ask a professional when you're unsure.