Waiting thirty days or more for a broker to pay is hard on a small carrier's cash flow. Two common ways to speed it up are factoring and a broker's quick-pay option. They solve the same problem in different ways.
How factoring works
A factoring company buys your invoices and advances most of the amount, often within a day. Brokers are told, through a notice of assignment, to pay the factor instead of you. The factor keeps a fee and may hold back a reserve until the broker pays.
How quick pay works
Quick pay is offered by an individual broker. You accept a small discount on that broker's invoice in exchange for being paid in a few days. There is no ongoing contract and no notice of assignment, but it only applies to brokers who offer it.
What to compare
- The real cost: a fee of a few percent sounds small, but over a year it adds up. Our factoring cost calculator shows the annualized rate.
- Recourse: with recourse factoring, you owe the money back if the broker never pays. Non-recourse shifts some of that risk to the factor, usually for a higher fee and only in defined situations.
- Contract terms: minimum volume, length of the agreement and how to end it.
- Extra services: some factors run credit checks on brokers and handle collections.
When each one fits
Factoring often suits a new or growing carrier that needs steady cash on every load. Quick pay can suit a carrier with healthy cash flow that wants speed only now and then, from brokers who offer it. Many carriers use neither once their receivables are well managed.
Keep the paperwork tight
Whichever you use, payments arrive faster when invoices go out the same day with clean paperwork: signed rate confirmation, bill of lading and proof of delivery.
General information, not financial or legal advice. Read any factoring agreement carefully, and ask your CPA or attorney before you sign.
This article is general information, not legal, tax or regulatory advice. Rules change; confirm current requirements with the responsible agency or a licensed professional.
