If you’ve ever looked into freight factoring, you’ve probably seen offers like “rates as low as 1.5%!” or “quick cash for your loads!”

But here’s the question most factoring companies hope you don’t ask:

“What am I actually paying?”

While the advertised rate might sound like a great deal, the truth is—many carriers end up paying significantly moreonce hidden fees, surcharges, and volume minimums come into play.

In this post, we’ll break down the real cost of freight factoring, help you understand the fees behind the scenes, and show you how to compare offers like a pro.

What Is an Advertised Rate? And Why It’s Often Misleading

Most factoring companies promote a low “headline rate” to grab your attention. You’ll often see things like:

• “Rates as low as 1.5%”

• “1% factoring available”

• “No upfront costs!”

While these numbers look great on paper, they usually only apply to very specific clients—typically large fleets factoring $100K+ per month with long-term contracts and minimal risk. If you’re a smaller fleet, new authority, or owner-operator, chances are you’re not getting that rate.

In reality, factoring companies make up the difference with a menu of fees that are buried in contracts or glossed over during the sales process.

The Hidden Fees That Inflate Your Effective Rate

Even if you’re quoted a low base rate, here’s what might be quietly increasing your factoring cost behind the scenes:

Invoice Upload or Processing Fees

These fees apply every time you send in paperwork. While they’re often just a few bucks per invoice, they can add up quickly if you’re hauling multiple loads a week. It’s basically a fee for doing business.

ACH Transfer Fees

Want your money sent directly to your bank account? Some factoring companies charge $10 to $25 per deposit just to transfer your funds. That’s like being taxed for getting paid. If you’re running lean, these fees can eat into your profit fast.

Broker Credit Check Charges

Checking the creditworthiness of a broker is a basic part of doing business. But some companies charge $5 to $10 every time you check a broker’s credit. If you’re trying to be smart and check all your loads, this turns into a punishment for being responsible.

Pro Tip: The Federal Motor Carrier Safety Administration (FMCSA) offers free access to carrier and broker safety/registration info via SAFER Web. It won’t replace full credit data but it’s a good place to start.

Minimum Volume Penalties

If you don’t hit a monthly minimum number of invoices or total volume, some factoring companies tack on a penalty feeor increase your rate for that month. This punishes you during slow periods, holidays, or seasonal slowdowns.

Termination or Early Exit Fees

Want to leave your factoring company because of poor service or better options elsewhere? Some lock you in with multi-year contracts and charge $500–$1,000 to cancel early. Others require a buyout if you want to transfer your receivables.

Same-Day or Weekend Funding Charges

Fast funding is one of the biggest reasons to use factoring—but for some companies, that speed comes at a price. They may charge extra fees for same-day processing, or if you need weekend or late-day payouts.

Reserve Holds or Non-Recourse Surcharges

Some companies hold a portion of your funds in a “reserve account” and delay payout until weeks later. Others charge more for non-recourse factoring—without clearly explaining what you’re getting in return. Learn more about the differences in recourse vs non-recourse factoring via Investopedia.

A Real Example: How 2% Becomes 3.5+%

Let’s say you factor $20,000 worth of invoices in a month.

Here’s how the math might look:

• Advertised Rate: 2% = $400

• ACH Transfers (4 @ $15): $60

• Credit Checks (10 @ $5): $50

• Same-Day Funding (2 @ $25): $50

• Invoice Upload Fees: $40

• Minimum Volume Fee: $100

Total Cost = $700 → Actual Rate = 3.5%
If there’s also a reserve hold or delayed payout, the cash flow hit is even bigger.

What looked like a “low 2% rate” just cost you over $300 more than expected—and that’s only one month.

How to Calculate Your Effective Factoring Rate

The effective rate is what you actually paid for factoring, not just the advertised base.

(Total Fees Paid ÷ Total Invoices Factored) × 100 = Effective Rate %

This formula gives you a clear picture of how much factoring is really costing your business. If you’re factoring consistently and not tracking your total fees, you could be bleeding thousands every year.

For help managing finances, the Owner-Operator Independent Drivers Association (OOIDA) offers financial education and tools for small carriers and independent drivers.

Why Carriers Are Switching to TMG

At Transportation Management Group, we’ve built a different kind of program—one built on trust, transparency, and simplicity.

Here’s how we stand out:

Lowest factoring rates available
No hidden fees—what you see is what you pay
Free broker credit checks
No ACH fees
No penalties for low volume
Same-day funding at no extra charge
Easy-to-read contracts with no long-term lock-in

We work with owner-operators, fleets, and new authorities across the country who want reliable, fast funding—without all the fine print.

Tips for Choosing a Transparent Factoring Partner

Before signing any factoring agreement, keep this checklist in mind:

• Ask for a full list of fees—not just the advertised rate.

• Request a sample monthly invoice so you can see how fees stack up.

• Read the fine print for volume minimums, reserve accounts, and exit clauses.

• Compare your effective rate, not just the base rate.

• Ask how long it takes to get paid—and whether that costs extra.

For a deeper dive, check out this guide from DAT Freight & Analytics: Choosing a Freight Factoring Company. It offers great insight into what to watch for—just make sure you’re not being upsold into a bad deal.

Conclusion: Know the Real Cost Before You Sign

Freight factoring can be an incredible tool for keeping cash flowing and trucks rolling—but only if you understand the true cost behind the offer.

If you’re working with a company that buries fees in fine print, charges you for things like ACH transfers, or punishes you for slow weeks, you’re not in a real partnership—you’re in a trap.

Want to know what your factoring is really costing you?
Let us do a quick, no-obligation cost breakdown.

We’ll show you exactly what you’re paying now—and how much you could save with TMG.

Request a Free Quote Today — Let’s put your money back where it belongs: in your pocket.