Advance Rate

What Is an Advance Rate

The advance rate is the percentage of your invoice that a factoring company pays you upfront when you submit the invoice.[^1] If you factor a $3,000 invoice at a 95% advance rate, you receive $2,850 immediately. The remaining $150 is held as a reserve.

The advance rate is separate from the factoring rate. The factoring rate is the fee you pay for the service. The advance rate determines how much cash you get right away. Both numbers matter when comparing factoring companies.

For owner operators and small fleets managing tight cash flow, even small differences in advance rates translate to meaningful dollar amounts across dozens of invoices per month.[^2] Use our factoring cost calculator to model different advance rate scenarios.

How the Advance and Reserve Work Together

When you submit an invoice for factoring, two things happen:

1. The factoring company advances you the agreed-upon percentage immediately
2. The remainder is held in reserve until the broker pays

The Reserve

The reserve serves as a cushion for the factoring company. It protects them against short-pays, deductions, or disputes. The reserve is your money. It is not a fee. You get it back after the broker pays, minus the factoring fee.

Here is how the math works on a $2,500 invoice with a 95% advance rate and a 3% factoring rate:

• Advance payment: $2,500 x 95% = $2,375 (you receive this immediately)
• Reserve held: $2,500 x 5% = $125
• Factoring fee: $2,500 x 3% = $75
• Reserve released after broker pays: $125 - $75 = $50

Your total payout: $2,375 + $50 = $2,425 on a $2,500 invoice. The factoring company keeps $75.

Typical Advance Rates

Most trucking factoring companies offer advance rates in these ranges:

90% to 92%: Lower end, more common with non-recourse agreements or new carriers. The larger reserve gives the factoring company more protection.

93% to 95%: The industry standard for most carriers. This balances cash flow needs against the factor's risk management.

96% to 97%: Premium advance rates for high-volume carriers with strong broker portfolios. Often requires recourse agreements and longer contracts.

98% to 100%: Sometimes advertised but less common. Very high advance rates usually come with higher factoring fees or are offered on specific invoice types with low-risk brokers.

Why the Advance Rate Matters

The advance rate directly impacts your available cash flow. The difference between a 90% and a 97% advance might not sound like much in percentage terms, but it adds up.

Consider a carrier factoring $80,000 in invoices per month:

• At 90% advance: $72,000 available immediately, $8,000 held in reserve
• At 95% advance: $76,000 available immediately, $4,000 held in reserve
• At 97% advance: $77,600 available immediately, $2,400 held in reserve

That $5,600 difference between 90% and 97% means real money when fuel bills, insurance premiums, and truck payments are due.

The reserve is not lost money. You eventually get it back minus the factoring fee. But the timing matters. If a broker takes 45 days to pay, your reserve is tied up for 45 days. During that time, you cannot use it for operating expenses.

Advance Rate vs Factoring Rate

New carriers sometimes confuse these two numbers or focus on one while ignoring the other. Both affect your total cost.

A company offering 97% advance at 4% factoring costs more per invoice than a company offering 93% advance at 2% factoring. On a $3,000 invoice:

• Company A (97% advance, 4% rate): You get $2,910 upfront, pay $120 in fees, total payout $2,880
• Company B (93% advance, 2% rate): You get $2,790 upfront, pay $60 in fees, total payout $2,940

Company B puts $60 more in your pocket per invoice despite the lower advance rate, because the factoring fee is half. The tradeoff is that Company B holds more of your money in reserve during the payment cycle.

For a complete overview of how factoring works and how to compare companies, see our freight factoring guide. Compare current offers on our factoring companies comparison page.