What Is Freight Factoring?

A shipper often takes 30 to 60 days to pay a freight invoice. A carrier cannot wait that long to cover fuel, and a broker cannot wait to pay the carrier. Freight factoring closes that cash gap: you sell the unpaid invoice to a factoring company, which advances you most of its value right away — often the next business day — and collects from the shipper later. You trade a small fee for immediate cash.

You deliver the load and get a signed proof of delivery. You submit the invoice with the POD and bill of lading to the factor. The factor verifies the invoice with the shipper, then advances you most of the amount the next business day. When the shipper pays on the normal due date, the factor releases any held reserve to you, minus its fee.

Factoring is priced as a small percentage of each invoice, usually in the low single digits, sometimes with a small reserve the factor holds back until the shipper pays. The right rate depends on your volume, the creditworthiness of your customers, and whether the factoring is recourse or non-recourse. Because the fee comes out of every load, even a fraction of a percent matters over a year.

With recourse factoring, if the shipper never pays, you buy the invoice back — a cheaper rate, but the credit risk stays with you. With non-recourse, the factor absorbs certain credit losses for a higher fee. Most healthy brokerages use recourse paired with solid debtor credit checks, so bad debts are rare.

A broker fronts carrier pay. Without factoring you are financing every load out of your own pocket while you wait 45 days on the shipper. Factoring lets you book more loads than your bank balance alone would allow, because your cash is not tied up waiting on slow-paying customers.

Traditionally, factoring means a separate portal where you re-key every invoice. On EllysTMS you configure your factor once — their rate, reserve, remittance, and how they take submissions — and every factored load is sent to them automatically, with the rate confirmation and the BOL/POD attached. Your factor plugs in the way it prefers: a standards-based EDI X12 210 freight invoice, or a receivables-only API key scoped to their own account. Ellys is not your factor and never touches your margin — you keep your own factor; EllysTMS just makes the hand-off native, direct, and clean. See pricing.

Compare the rate, the reserve, how fast they fund, whether it is recourse or non-recourse, and — often overlooked — how they treat your customers when they collect. A factor that is rude to your shipper damages a relationship you worked to build. Read the notice-of-assignment terms so you understand exactly how collections will work.