A Guide to Factoring Rates, Costs, & the Extras Perks to Keep in Mind

How Much Does Factoring Cost?

How Much Does Factoring Cost?

When you are comparing factoring rates and fees, your best bet is to always look beyond the bare numbers. That’s because all factoring companies do not offer the same services. So, when you compare factoring rates you’ll want to compare what your company needs and what you’re getting.

Factoring companies charge a small percentage of each freight invoice you factor. To determine a factoring rate, they will consider the customers you haul for, the volume you plan to factor, whether you choose a recourse or non-recourse factoring plan, and the risk involved.

Be wary of a quoted rate before the factor knows anything about your company. Imagine this: You call a truck dealer and say, “I have a truck to sell you, how much will you give me?” Before he answers, he’ll ask about the make and model, the year, the condition of the vehicle. Then you might get an estimate, but he’ll want to see the truck before he can give you a solid offer.

That should be just like talking to a factoring company. To get an accurate and fair rate, they should understand your business and plans. Otherwise your rate might be too high and hurt you, or too low and they won’t buy your freight bills.

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How Much Does Factoring Cost for Trucking Companies

Trucking Factoring Rates

Flat Factoring Rates

A flat factoring fee is fixed. The percent charged by the factor is the same rate no matter if the invoice gets paid in 15 days or 60 days. You will get charged the same percentage for every invoice. This benefits some companies and makes planning your cash flow a little easier.

Tiered Factoring Rates

Tiered factoring rates are another way factoring companies can set up your account. The brokers and shippers you work with probably have varying payment terms. With a tiered rate, the rate you pay varies depending on how long it takes your customer to pay. So you will pay a lower factoring fee for an invoice that pays in 15 days than you will for an invoice that pays in 60 days.