Factoring is a way for a trucking company to get cash quickly. Instead of waiting 30, 60, or 90 days for a broker or shipper to pay an invoice, the carrier sells that invoice to a factoring company and receives most of the money immediately. The factoring company then collects the full amount from the payer and keeps a small fee.
For smaller carriers and owner-operators, factoring smooths out cash flow so fuel, payroll, and repairs can be covered without waiting on slow-paying customers. The trade-off is the discount taken on every invoice, so it’s a cost worth weighing against the value of faster payment.