Freight Factoring Process Explained | Step-by-Step Guide

Step 1: Deliver the Load

Your trucking company completes a shipment for a broker or shipper. You issue an invoice along with supporting documents like a bill of lading or proof of delivery.

Step 2: Submit the Invoice to the Factor

Instead of waiting 30–90 days for your customer to pay, you submit the invoice to a freight factoring company. This can usually be done electronically through a portal, email, or app.

👉 Mehmi offers invoice & freight factoring solutions designed specifically for transportation businesses.

Step 3: Advance Payment

The factoring company advances 70%–95% of the invoice value to your account within 24–48 hours.

• Example: Invoice = $20,000 → Advance Rate 90% → $18,000 cash upfront.
  
  

Step 4: Collections by the Factor

The factoring company then collects payment directly from your customer on the original invoice due date (e.g., 30, 60, or 90 days).

• With recourse factoring, you’re responsible if your customer doesn’t pay.
  
  
• With non-recourse factoring, the factoring company assumes the risk of non-payment.
  
  

Step 5: Remaining Balance Settlement

When your customer pays the full invoice, the factoring company deducts their fee (1%–5%) and releases the remaining balance to you.

• From the $20,000 example above: $18,000 advance + $1,600 balance after fees = $19,600 net proceeds.
  
  

Timeline Summary

Why This Process Works Well for Trucking

• Covers fuel, maintenance, and payroll immediately
  
  
• Turns receivables into working capital quickly
  
  
• Improves ability to bid on bigger contracts
  
  
• Reduces time spent chasing payments
  
  

FAQ: Freight Factoring Process

1. How fast can I get cash after invoicing?
Usually within 24–48 hours after submitting to the factoring company.

2. How much of my invoice will I receive upfront?
Most factors advance 70%–95%, with trucking often qualifying for higher advances.

3. Do I lose money in the process?
You pay a fee (1%–5%), but gain immediate liquidity to keep operations running.

4. What documents are needed?
Typically invoices, bills of lading, and proof of delivery.

5. Is factoring considered debt?
No. It’s an advance on your receivables, not a loan.

6. Can startups use freight factoring?
Yes—factoring is based on your customers’ credit, not your own.

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Final Thoughts

The process of freight factoring is straightforward: deliver, invoice, submit, get cash, and let the factor handle collections. For trucking companies, it bridges the gap between delayed customer payments and immediate operating expenses.

At Mehmi Financial Group, we provide transparent and fast freight factoring solutions that help carriers across Canada manage cash flow and grow their fleets.

Run your numbers with our calculator or contact us for a personalized quote.

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