How Freight Factoring Works

What Is Freight Factoring?

Freight factoring is a financing solution designed for trucking and logistics companies that face long payment cycles from shippers and brokers. Instead of waiting 30–90 days to receive payment, carriers sell their invoices to a factoring company and get immediate cash to cover fuel, payroll, maintenance, or expansion needs.

Unlike traditional loans, factoring isn’t debt—it’s an advance on money you’ve already earned. This makes it one of the most effective tools for transportation businesses that need to keep trucks moving while waiting for clients to pay.

👉 Learn more on Mehmi’s invoice & freight factoring page.

How Freight Factoring Works Step by Step

1. Complete the Delivery
   Your trucking company delivers a load and issues an invoice to the shipper or broker.
   
   
2. Submit the Invoice
   You send the invoice (and proof of delivery) to a factoring provider.
   
   
3. Get Paid Fast
   The factor advances 70–95% of the invoice value within 24–48 hours.
   
   
4. Factor Collects Payment
   Once your customer pays the invoice, the factor deducts their fee and releases the remaining balance to you.
   
   

Example:

• Invoice value: $10,000
  
  
• Advance rate: 90% → $9,000 upfront within 24 hours
  
  
• Factoring fee: 3% ($300)
  
  
• Remaining payment: $700 once the customer pays
  
  

Why Canadian Trucking Companies Use Freight Factoring

Trucking businesses across Ontario, Alberta, B.C., Quebec, and the Prairies rely on factoring to manage:

• Fuel & Maintenance Costs – Cover high upfront expenses while waiting for receivables.
  
  
• Driver Payroll – Pay staff weekly, even if invoices take months to clear.
  
  
• Fleet Expansion – Use steady cash flow to qualify for equipment loans or buy used trucks from Mehmi’s inventory.
  
  
• Seasonal Workloads – Keep operations steady during busy shipping seasons.
  
  

Advantages of Freight Factoring

• Immediate cash flow – No waiting 30–90 days for payments.
  
  
• High approval rates – Based on your customers’ credit, not yours.
  
  
• Scalable funding – The more you invoice, the more you can factor.
  
  
• Reduced admin – The factor often handles collections.
  
  
• No added debt – It’s not a loan; you’re advancing on earned revenue.
  
  

Costs of Freight Factoring

In Canada, factoring fees typically range between 1.95% and 5% per invoice.

• Advance rates: 85–95% upfront, sometimes higher for trucking.
  
  
• Flat fee vs variable: Some providers charge a fixed %; others increase fees if invoices remain unpaid longer.
  
  

👉 Use Mehmi’s calculator to estimate your factoring cost.

Case Study: Ontario Carrier Using Freight Factoring

A Brampton-based fleet of five trucks was waiting 60 days for $150,000 in receivables. This created weekly cash crunches, leaving drivers frustrated and slowing down operations.

By using Mehmi’s freight factoring program, they advanced 90% of invoices within 48 hours. The fleet secured cash for fuel, maintenance, and payroll—avoiding downtime. Within six months, the carrier expanded to eight trucks and increased revenue by 40%.

Freight Factoring vs Business Loans

FAQ: Freight Factoring

1. How fast do I get paid?
Typically within 24–48 hours after invoice submission.

2. How much will I receive upfront?
Usually 70–95% of the invoice value.

3. Is factoring expensive?
Fees average 2–5%, but the cost is offset by improved cash flow and growth.

4. Will my customers know I use factoring?
Yes—payments are redirected to the factoring company, but it’s standard in trucking.

5. Can startups use freight factoring?
Yes—if you have paying clients, you can qualify even with limited business history.

6. How is it different from a loan?
Factoring isn’t debt; it’s an advance on receivables you’ve already earned.

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Final Thoughts

Freight factoring is one of the most practical tools for Canadian trucking companies. It turns invoices into working capital, helping carriers cover fuel, payroll, and repairs without waiting weeks for payment.

At Mehmi Financial Group, we specialize in invoice and freight factoring with transparent fees, fast approvals, and industry expertise.

Run your numbers today with our calculator or contact us to secure immediate cash flow.

Are you looking for a truck? Explore our used inventory.