Factoring Rate

What Is a Factoring Rate

A factoring rate is the percentage fee a factoring company charges for purchasing your freight invoice and advancing you cash.[^1] When you factor a $3,000 invoice at a 2.5% rate, the factoring company earns $75 on that transaction. You get paid immediately instead of waiting 30-60 days for the broker to pay.

The factoring rate is different from the advance rate, which determines what percentage of the invoice you receive upfront. The factoring rate is the cost of the service. The advance rate is how much cash you get right away.

Understanding how factoring rates work is essential for evaluating whether factoring makes financial sense for your operation and for comparing offers from different factoring companies. Our factoring cost calculator helps you see the real dollar impact.

Typical Factoring Rate Ranges

Factoring rates in trucking generally fall between 1% and 5% per invoice.[^2] Where you land in that range depends on several factors.

1% to 2%: Reserved for high-volume carriers ($100,000+ monthly), established operations with strong broker relationships, and recourse factoring agreements. Getting rates this low typically requires a long-term contract commitment.

2% to 3.5%: The most common range for established owner operators and small fleets with $20,000-$100,000 in monthly volume. This is where most carriers land after their first six months of factoring.

3% to 5%: Typical for new authorities with limited volume, carriers with non-recourse agreements, or those on month-to-month contracts without volume commitments.

For a detailed breakdown of how to evaluate factoring costs, see our complete freight factoring guide.

Flat Rate vs Variable Rate

How the rate is structured matters as much as the percentage itself.

Flat Rate

A flat rate stays constant no matter how long the broker takes to pay. If your rate is 2.5%, you pay 2.5% whether the broker pays in 10 days or 50 days. Flat rates make budgeting simple because your cost per invoice is predictable.

Variable Rate (Tiered/Escalating)

A variable rate starts lower but increases over time. A typical structure might be 1.5% for the first 30 days, then an additional 0.5% for every 15 days the invoice remains unpaid. If the broker pays in 20 days, your effective rate is 1.5%. If they take 60 days, your rate climbs to 3.5%.

Variable rates can save money when your brokers pay quickly, but they create cost uncertainty and can get expensive when payments slow down. You have no control over how fast brokers pay.

Which Is Better

For most owner operators, flat rates are safer. You know your exact cost per invoice regardless of broker payment speed. Variable rates only make sense if you work primarily with fast-paying brokers and have confidence in their payment patterns.

What Affects Your Factoring Rate

Several factors determine the rate a factoring company offers you.

Monthly invoice volume. Higher volume means more revenue for the factor, which gives them room to lower your rate. Factoring companies want carriers who consistently generate invoices.

Broker credit quality. If your brokers have strong credit ratings and a history of paying on time, the factor's risk is lower, and they can offer better rates. Working with well-known brokers like CH Robinson, TQL, and Echo helps.

Recourse vs non-recourse. Non-recourse factoring costs more because the factoring company absorbs losses if a broker goes bankrupt. Expect to pay 1-2% more for non-recourse protection.

Contract length. Committing to a longer-term contract often gets you a lower rate. Month-to-month flexibility costs more per invoice.

Authority age. New authorities (under six months) are considered higher risk and typically receive higher rates. Rates often improve after 6-12 months of clean history.

Comparing Factoring Rates

When evaluating factoring companies, do not compare rates in isolation. A company offering 2% with $25 in wire fees per transaction and a $500 monthly minimum could cost more than a company charging 2.5% with no additional fees.

Calculate the total cost per month, not just the per-invoice rate. Use our factoring cost calculator to model different scenarios with your actual invoice volume and sizes.

Ask every factoring company for their complete fee schedule. The rate is just the starting point. Processing fees, transfer fees, reserve holdback percentages, and minimum volume requirements all affect your true cost.