Freight Factoring Glossary
Every factoring term a carrier actually runs into, defined in plain English. No jargon explaining jargon.
Freight Factoring Terms, A to Z
Jump to a letter, or scroll the full list. Terms that change what you pay link to our calculator so you can see the math with your own numbers.
Accounts receivable
The money owed to your trucking company for loads you have delivered but not been paid for yet. Factoring turns receivables into same-day cash by selling those invoices at a discount instead of waiting 30 to 60 days.
ACH transfer
The standard electronic bank transfer factors use to send your money, arriving the next business day. The best factors send ACH free; others charge $5 to $10 per transfer, which quietly raises your real rate.
Advance rate
The percentage of the invoice a factor pays you up front, typically 90% to 100% in trucking. Whatever is not advanced sits in reserve until the broker pays. See what your advance rate means in dollars with our freight factoring calculator.
Aging report
A report listing your unpaid invoices grouped by how long they have been outstanding: 30, 60, or 90+ days. Factors read it to judge how reliably your customers pay.
Bill of lading (BOL)
The document proving a load was picked up and delivered as agreed. A clean, signed BOL is the single piece of paperwork a factor must have before funding an invoice.
Broker credit rating
A score reflecting how reliably a freight broker pays carriers. Factors check it before buying an invoice, and most will decline loads hauled for brokers with weak credit. Checking a broker through your factor before you book is free protection.
Buyout
When a new factoring company pays off your open balance with your current factor so you can switch. Factors handle buyouts directly with each other; always get the payoff amount in writing before you commit to the move.
Carrier packet
The onboarding paperwork a broker requires before you haul for them: operating authority, insurance certificate, W-9, and your factor's notice of assignment.
Chargeback
When a factor takes back money it advanced because the broker refused to pay or disputed the load. Chargebacks are how recourse factoring works in practice, and they are the tradeoff behind its lower rate.
Concentration limit
A cap on how much of your factored volume can come from one broker or shipper, commonly 20% to 40%. Go over it and the factor may decline further invoices from that customer until the balance pays down.
Contract factoring
A plan where you commit to factoring all or most of your invoices, usually in exchange for a lower rate. The opposite of spot factoring, where you pick and choose loads.
Days to pay (DSO)
How long a customer actually takes to pay an invoice. Brokers in trucking commonly pay in 30 to 45 days, and that wait is exactly what factoring eliminates.
Debtor
In factoring paperwork, the party who owes the invoice: the broker or shipper. Once you factor a load, the factor collects from the debtor, not from you.
Dilution
Anything that shrinks what a customer finally pays versus the invoice's face value: shortages, damage claims, or deductions. High dilution makes factors cautious and can affect your rate.
Discount rate
Another name for the factoring fee percentage, typically 1.5% to 4% per invoice in 2026. On a $2,500 load at 3%, the discount is $75. Model yours in the calculator.
Early termination fee
A penalty for leaving a factoring contract before its term ends, ranging from a few hundred dollars to a percentage of your credit line. Avoid it entirely by signing month-to-month or 30-day-out terms.
Effective rate
Your true all-in factoring cost: everything you paid in a month, including transfer fees, processing fees, and minimums, divided by the dollars you factored. It is almost always higher than the advertised rate, which is why our calculator computes it for you.
Factor (factoring company)
The company that buys your invoices, advances the cash, and collects from your brokers. In trucking, the best factors also bundle fuel cards, broker credit checks, and back-office support.
Factoring agreement
The contract governing the relationship. The five clauses to read twice: the rate, the advance rate, recourse vs. non-recourse, the term and exit conditions, and the full fee schedule.
Flat rate
A single fixed fee percentage no matter how long the broker takes to pay. Predictable and usually the right choice for carriers, unlike tiered rates that climb with time.
Fuel advance
A partial payment, often 40% to 50% of the load, released at pickup so you can fuel the trip. Convenient but not free: most factors charge 1% to 3% of the advance or a flat fee each time.
Fuel card program
A discount fuel card bundled with your factoring account, typically saving 20 to 60 cents per gallon at network stops. On 1,500 gallons a month, a 20 cent discount claws back $300 of your factoring cost.
Invoice verification
The factor's confirmation with the broker that the load was delivered and accepted before funds are released. Fast verification is what separates same-day factors from slow ones.
Letter of release
A document from your old factor confirming it no longer has a claim on your invoices. Brokers and your new factor will ask for it when you switch companies.
Lumper fee
A charge for third-party loading or unloading labor at a warehouse, usually reimbursed by the broker. Many factors will advance lumper fees so the cash is not out of your pocket.
MC authority
Your FMCSA operating authority, the license to run freight under your own name. Factors will sign brand-new authorities, but expect to start near the top of the rate range until you build payment history.
Monthly minimum
A floor on the fees the factor collects each month, often $100 to $500. Factor less than the floor and you are billed the difference, which is brutal in a slow month. Negotiate it out before signing.
Non-recourse factoring
A plan where the factor absorbs the loss if the broker fails to pay for credit reasons, such as bankruptcy. It costs roughly 0.5 to 1 point more than recourse and covers credit failure only, not disputes or paperwork problems. Full recourse vs. non-recourse breakdown here.
Notice of assignment (NOA)
The legal notice telling your brokers to pay the factor instead of you. It stays in effect until the factor releases it, which is why the letter of release matters when you switch. Our full NOA guide explains how brokers react.
Open invoice
An invoice for a delivered load that has been billed but not yet paid. Open invoices are what a factor buys, and what a new factor buys out when you switch.
Quick pay
A broker's own early-payment program, usually 2% to 5% per load for payment in 1 to 5 days. Works load by load with no contract, but only with brokers that offer it. Quick pay vs. factoring, compared.
Rate confirmation
The signed agreement on what a broker pays for a load. Factors match your invoice against the rate con, so a missing or altered one stalls funding.
Recourse factoring
The standard, cheaper plan: if the broker never pays, you buy the invoice back or the factor charges it back against your account. You carry the credit risk in exchange for a lower rate.
Reserve
The slice of the invoice held back when the advance rate is under 100%, released after the broker pays, minus fees. Top trucking factors now advance 100% with no reserve at all.
Same-day funding
Money in your account the same business day you submit paperwork, provided you hit the factor's cutoff time, usually around noon. After-cutoff submissions fund next morning by ACH.
Spot factoring
Factoring individual invoices as needed with no volume commitment. Maximum flexibility, but rates run higher than contract factoring because the factor cannot count on your volume.
Tiered rates
A fee that grows the longer the broker takes to pay, for example 1.5% for the first 30 days and more after. Tiered quotes look cheap in ads and cost more in practice; ask for the flat-rate equivalent before comparing.
TONU (truck ordered, not used)
A fee owed to you when a booked load cancels after your truck is committed, commonly $150 to $300. You can usually factor a TONU invoice if you have the rate con and cancellation in writing.
UCC filing (UCC-1)
A public lien the factor files to secure its interest in your receivables. Standard practice, not a red flag, but it must be terminated or subordinated before a new factor can take you on. What a UCC filing means for your business.
Wire transfer fee
The charge for same-day wire delivery of your funds, typically $15 to $30 per wire. Two wires a week is $2,600 a year; use free next-day ACH unless the cash truly cannot wait.
Know the Terms? Now Run Your Numbers.
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