A strong cash flow helps many trucking company owners navigate industry turbulence. While your competitors may fail due to late payments and unexpected expenses, you don’t have to. Freight factoring is a useful business tool for staying solvent, even in slow periods.
With freight factoring with Saint John Capital, you submit a bill of lading to a factor and receive an immediate cash advance. That advance might be as little as half of the money you’re owed or the entire amount. However, there are fees for the service. Understanding freight factoring fees is your first step to choosing the right arrangement for your trucking company. Knowing possible fees is the key to keeping your costs down.
Freight Factoring Fees: A Breakdown
If you’re considering freight factoring in 2025, you need to understand the possible fees. While the freight factoring specialist you chose may not charge all of these fees, some will. It helps to understand what you may be required to pay so that you can customize your arrangement to keep your fees as low as possible.
Factoring Fee
When you sign up for freight factoring, every payment you receive will have the factoring fee deducted from the invoice amount. This fee covers the cost of factoring, such as invoice generation, immediate payments, and hours spent on collections.
A factoring fee is a percentage of the amount your client owes you. It may range from as low as 1% to 5%. It’s less common to see factoring fees that exceed 5%, which makes the arrangement far more advantageous than paying credit card interest to cover bills until your client pays you.
Factoring fees are often based on how much work you do each month and how many trucks are in your fleet. The more bills of lading you send to the factor, the lower the rate. Your client’s credit rating and the age of the invoice also help determine the factoring fee.
Credit Check Fee
Some companies charge you a fee for running a business credit check on your clients. Ideally, you want to partner with a freight factoring specialist that provides unlimited free business credit checks. In some situations, you’re only allowed a maximum amount of credit checks each month. If you exceed them, you pay a fee for every credit report over that limit.
ACH Fee
If you’re paid directly to your checking account, your bank may charge ACH transaction fees. Make sure these are low enough that you won’t be hesitant to submit several invoices per day. Otherwise, you’ll want to stick to as few requests as possible to keep bank fees down.
Fuel Surcharge
When a freight factoring company pays you, you often have the option to have the funds sent directly to a fuel card. That card may have fuel discounts attached to help you save money. Because fuel prices fluctuate, some factors add a fuel surcharge to cover any extreme changes.
Hidden Fees
When you enlist the services of a freight factoring company, the business may slip in hidden charges. That’s why we stress the importance of reading the contract before you sign it. If you spot hidden fees, don’t sign unless you’re okay with these fees. Some of the most common include wire transfer fees, which require you to pay a fee if the payment is made via wire transfer. You may pay a fee for the application or documents that are generated with each payment request.
If your client doesn’t pay the invoice on time, you may be charged a penalty. If you have a client who continues to pay invoices after the due date, those late payment penalties add up fast.
Reserve
There are several options when factoring invoices. You might get a 100% advance, which means the entire amount you’re owed is paid to you once the fees are deducted. There are other arrangements where a portion of what you’re owed is held in reserve.
For example, if the arrangement is a 50% reserve, the amount you’re owed is divided in half after the fee is deducted. You get half of that money owed now and the balance is paid once your client pays the invoice.
Tips for Keeping Factoring Fees Low
Those are fees you face, so how do you make sure you’re getting the lowest possible fee? Start by partnering with customers who have a positive credit history. Factors will increase the fees or refuse to factor invoices from what they feel are risky investments. Before agreeing to work with a new-to-you company, check their credit history. Avoid companies with a history of late or missing payments.
Non-recourse factoring is helpful in avoiding having to repay if your client fails to pay an invoice due to a sudden closure or bankruptcy. It’s like insurance, however, so you pay a higher fee for the benefit of not having to repay the amount you received in advance. If you need low fees, recourse factoring is cheaper, but you risk having to repay funds that you received in advance.
Older invoices cost more to factor. Make sure you’re doing everything possible to get your clients to pay their invoices on time. Start by maintaining a strong relationship with your customers.
Shop around and make sure you’re getting the best rates, but don’t forget that the cheapest isn’t always the greatest. If Company A offers you a factoring rate of 1% and Company B offers 2%, you might think lower is ideal. Make sure you check for all of the additional fees and see if the fees outweigh the lower rate.
Don’t rule out the additional services as part of the overall benefits package you get with your freight factoring rate. If you have an offer of 1% that charges $50 each for credit checks that exceed the maximum of four, a 2% rate may end up being cheaper. If your factoring arrangement includes services like access to free load-finding boards, fuel discounts, and low-interest lines of credit, those services make up for the higher rate.
A strong cash flow is within your reach. Use freight factoring to improve your company’s cash flow without losing too much to the various fees. The most important thing to remember is that you have the power to negotiate fees and factoring arrangements to ensure you’re getting paid quickly without taking a large financial hit due to exorbitant fees.
Saint John Capital has some of the lowest fees in the industry. We pride ourselves on helping you find the best factoring arrangements for your company. Whether you need all of the money you’re owed up front, or half of it would make a difference to your cash flow, we’ll work with you to ensure your freight factoring contract suits your needs.
