For freight brokers, managing cash flow can be one of the toughest parts of the job. You pay your carriers quickly, but your customers often take 30 to 90 days to settle their invoices. That delay can put serious stress on your finances and limit your ability to grow. Freight broker factoring solves this by giving you access to fast cash without waiting on slow payments.

This guide explains what freight broker factoring is, how it works, its benefits, and how to choose the right factoring partner to support your brokerage business.

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What Is Freight Broker Factoring?

Freight broker factoring is a financing solution where you sell your unpaid invoices to a factoring company, and in return, the company advances most of the invoice amount to you within 24 hours. This gives you quick access to working capital so you can keep your business running smoothly.

Factoring is not a loan. You are not borrowing money, and there is no debt to repay. Instead, you are getting early access to money your business has already earned. Once your customer pays the invoice, the factoring company sends you the remaining balance, minus a small fee for their service.

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How Does It Work?

The factoring process is simple and fast:

1. You invoice your customer after a load is delivered.

2. You send the invoice to your factoring company instead of waiting for payment.

3. The factoring company advances you a large portion of the invoice, typically 95 to 98 percent, within one business day.

4. Your customer pays the factoring company directly when the invoice comes due.

5. You receive the remaining balance, minus the factoring company’s fee.

This cycle helps you avoid cash flow problems and focus more on building your freight brokerage.

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Why Freight Brokers Use Factoring

There are several reasons freight brokers turn to factoring:

1. Immediate Access to Cash

Cash flow issues can hold your business back. Factoring gives you access to funds within 24 hours, allowing you to pay carriers on time, cover fuel and operating costs, and take on more loads without worrying about cash.

According to FreightWaves, many small and mid-sized logistics businesses use factoring to handle expenses that can’t wait, like fuel advances or quick pays to carriers.

2. Better Carrier Relationships

Paying your carriers quickly helps build strong, lasting relationships. When drivers know you will pay them on time, they are more likely to accept your loads again in the future. This gives you a competitive edge and access to better service.

3. No New Debt

Because factoring is not a loan, there is no interest and no repayment schedule. Your balance sheet stays clean and your credit is unaffected. This makes it an excellent option for businesses that want to avoid debt but still need working capital.

4. More Time to Grow Your Business

Factoring companies often handle collections for you, which saves you time. You no longer need to follow up on past-due invoices or chase down payments. This gives you more time to focus on building your network, booking more freight, and managing customer relationships.

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Understanding Recourse vs. Non-Recourse Factoring

There are two main types of factoring: recourse and non-recourse.

• Recourse factoring means that you are responsible if your customer does not pay. If the factoring company cannot collect on an invoice, they may ask you to repay the advance.

• Non-recourse factoring means the factoring company assumes the risk of non-payment if your customer goes out of business or becomes insolvent. These agreements usually come with slightly higher fees to cover the risk.

Make sure you understand which option your factoring company offers and what protections are included.

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What Does Freight Broker Factoring Cost?

Factoring fees typically range from 1 percent to 5 percent of the invoice amount, depending on several factors:

• The creditworthiness of your customers

• The amount of your monthly volume

• How long your customers take to pay

You may also see additional fees, including:

• ACH or wire transfer fees to receive your money

• Invoice aging fees if payments are delayed beyond a certain number of days

• Monthly minimum fees if you don’t meet the required volume

• Termination fees if you end the contract early

It is important to read the agreement carefully and understand all the costs before signing.

You can learn more about factoring fee structures from the National Association of Credit Management.

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Are There Tax Implications?

Yes, but they are simple. Factoring is not a loan, so the money you receive is still considered income. You will report the total income when it is received, and the factoring fee is usually treated as a business expense, which can help reduce your taxable income.

To learn more about how the IRS views business income, visit IRS.gov.

We recommend speaking with a qualified tax professional to ensure your reporting is correct.

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What to Look For in a Factoring Partner

Not all factoring companies are the same. When choosing a partner, look for one that specializes in freight and understands the logistics industry. Here are some features to consider:

• Fast funding with same-day or next-day deposits

• Simple, transparent fees without hidden charges

• No long-term contracts or cancellation penalties

• Good customer support with a dedicated account manager

• Online tools that make uploading and tracking invoices easy

Some factoring companies offer fuel advances, credit checks on shippers, and other services that can be helpful for brokers. Be sure to ask about additional benefits before you commit.

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Why Freight Brokers Choose TMG

At TMG, we understand the pressure freight brokers face. You need fast access to cash, reliable carrier payments, and a partner that respects how your business operates. That is why we offer:

• Same-day funding on approved invoices

• No hidden fees or long-term contracts

• Easy-to-use customer portal for fast invoice uploads

• A team that knows freight and speaks your language

Whether you are just starting out or already moving dozens of loads a week, TMG can help keep your business moving.

Explore our Freight Factoring Services or see Industries We Serve to learn how we help freight brokers, carriers, and more.

Freight broker factoring is a smart financial tool that gives you fast access to cash, improves relationships with your carriers, and removes the stress of slow-paying customers. Instead of worrying about when your invoices will be paid, you can stay focused on growing your brokerage.

By partnering with a trusted factoring company like TMG, you can simplify your billing, improve your cash flow, and move forward with confidence.

If you’re ready to get started, reach out to TMG today and get funded as soon as tomorrow