Freight Factoring Explained: Recourse, Non Recourse and What It Really Costs

1 What is freight factoring and how does the money move?

OTR Solutions says it typically advances 95% to 97% on recourse deals and funds non recourse advances within 24 to 48 hours. Other factors set their own numbers.

A FreightWaves example shows how the pieces fit. Say you invoice $3,000. A 96% advance puts $2,880 in your account. The factor holds a $120 reserve, and a 3% fee comes to $90. When the broker pays on time, you end up with $2,910 in total. That example comes from a factoring company's contributed article, so treat the numbers as an illustration, not a price list.

The factor also tells the broker to pay it instead of you. That is called a notice of assignment. Under the Uniform Commercial Code, section 9-406, once a customer gets that notice, paying the original seller no longer clears the debt. In plain words, the broker now has to pay the factor. If a check from that broker lands in your hands, read your contract before you deposit it.

2 What is the difference between recourse and non recourse?

Both OTR Solutions and Truckstop say recourse usually costs the least and non recourse costs a bit more because the factor takes on risk. OTR Solutions puts the usual recourse window at 60 to 90 days. If the customer has not paid by then, you buy the invoice back or swap in another invoice of equal value. Truckstop gives no window. It tells you to ask how soon you would have to buy back.

The DAT guide, last updated in January 2026, says base fees start near 2% of the invoice. It also warns that tiered rates, processing fees, collection fees and monthly minimums can raise the total.

3 What does non recourse really cover?

It usually does not cover problems on your side of the paperwork. DAT says disputed invoices are out, and so are invoices sent straight to the customer instead of the factor. Truckstop adds breach of contract and says coverage varies by provider, with more protection costing more. The FreightWaves Checkpoint guide, published February 17, 2026, adds short pays, paperwork defects and fraud to the usual exclusions. Even with a non recourse deal, it warns, chargebacks can still apply.

Coverage also depends on the factor approving the broker first. OTR Solutions says its protection applies only to brokers it has approved. If you haul for a broker the factor never credit checked, expect to carry that risk yourself.

Here is how it plays out. This table is my summary of the sources above, and your contract can differ.

The Convoy shutdown shows what non recourse can look like when it works. FreightWaves reported in August 2026 that OTR Solutions absorbed its share of a loss that left factors with more than $100 million in exposure, rather than charging carriers. That is OTR's account, and other factors may have handled it differently, so ask any factor how it treated carriers in that case.

4 How much does freight factoring really cost?

Then check how the rate is built. A flat rate is one percentage no matter how long the broker takes. A tiered rate starts lower and climbs. Bobtail's example is 1.5% for invoices paid in 1 to 30 days and 3% for days 31 to 60.

Here is what that looks like on a $2,000 load. These are my calculations from the sample rates above.

The last row matches the sample on the RigDigest factoring fee calculator, where a $10 flat fee turns a 3% rate into a 3.5% effective rate. At 12 loads a month on $2,000 invoices, a flat 3% costs $720 a month, or $8,640 a year.

5 What does the quoted rate hide?

Chargebacks are the big one. In the FreightWaves example, a carrier on a 2.5% plan factors $150,000 a year and expects $3,750 in fees. Two chargebacks, one for $3,000 and one for $2,000, lift the total to $8,750 when you count those two unpaid invoices as losses. That is an effective rate of about 5.8%. A chargeback means the factor takes back the advance, often with a processing fee. On the article's $3,000 load, you would repay $2,880 plus a $20 fee.

So the real cost is the quoted rate plus every fee on the schedule plus any chargebacks. Add them up on your last 20 invoices and divide by the invoice total. That number is your effective rate.

6 Is factoring worth it compared with waiting?

If a fuel bill and a truck payment land this week, that fee is a fair trade. If you have a cash cushion and factor every load out of habit, you pay a lot for money you do not need.

The fix is selective factoring, where you choose which invoices to submit. Some factors allow it. Others demand every invoice, or a minimum volume each month. The FreightWaves Checkpoint guide recommends selective factoring where you can get it.

Factoring also eats into what the broker's rate leaves you. To see how much of each load dollar a broker keeps, read what percent freight brokers keep. And to find loads from brokers you can vet before you book, start with our guide to owner operator loads and free load boards.

7 What should you check before signing?

• Recourse window. How many days before an unpaid invoice is charged back? Get the number in writing.
• Non recourse scope. Ask which causes are covered, and ask whether you get credit approval on each broker before you book.
• Fee schedule. Ask for one full schedule. Compare it line by line with the contract.
• Rate type. Flat or tiered, and when the tiers change.
• Minimums. Monthly volume or fee minimums, and what you pay if you miss them.
• Exit terms. Notice period, auto renewal and early termination fees. The Checkpoint guide suggests asking for 30 to 60 days of notice.
• UCC lien. Ask that the filing cover only the invoices you factor, and ask how fast the factor releases it when you leave.
• Reserve release. How fast, and how is it itemized?

Run the numbers on your own loads