Quick answer: Freight factoring (also called trucking factoring) is a financing solution where carriers and owner-operators sell unpaid freight bills (invoices) to a factoring company in exchange for immediate cash.
Freight Factoring Defined
Instead of waiting 30–90 days for brokers or shippers to pay, trucking businesses receive up to 95% of the invoice value within 24–48 hours. Once the customer pays the invoice, the factor releases the remaining balance minus a small fee.
At Mehmi Financial Group, our invoice and freight factoring program helps Canadian trucking companies keep drivers paid and trucks on the road.
BDC’s factoring guide distinguishes selling receivables from borrowing money.
“Factoring is not a loan”
That distinction matters when comparing factoring with a credit line: review invoice eligibility, collection responsibilities, fees and who bears non-payment risk.
How Freight Factoring Works
- Deliver Freight & Issue Invoice
A carrier hauls a load worth $5,000 and issues an invoice with 45-day terms. - Sell the Invoice to a Factor
Mehmi (the factor) advances 90% — $4,500 — subject to lender review. - Customer Pays Invoice
After 45 days, the broker pays the full $5,000 directly to the factor. - Receive Remaining Balance
The carrier gets the final $500 minus a factoring fee (usually 1–3%).
Result: Drivers, fuel, and insurance get paid immediately — no waiting on brokers.
Why Trucking Companies Use Freight Factoring
- Cover Fuel Costs – The #1 daily expense in trucking.
- Driver Pay – Keep drivers loyal and paid weekly.
- Insurance & Repairs – Manage fixed costs without stress.
- Growth Opportunities – Take on new loads without cash flow gaps.
For small fleets and owner-operators, freight factoring bridges the gap between slow-paying clients and daily operating needs.
Advantages of Freight Factoring
- Access to Cash, Subject to Approval
- Approval Based on Customer Credit (not your own).
- No New Debt — You’re selling invoices, not taking a loan.
- Scales With Revenue — More loads = more cash available.
Disadvantages of Freight Factoring
- Cost – Fees of 1–3% per invoice add up over time.
- Customer Disclosure – Brokers and shippers know you’re factoring.
- Not All Invoices Qualify – Only invoices from creditworthy shippers are accepted.
- Dependency Risk – Some carriers become too reliant instead of building long-term reserves.
If you want a more predictable structure, consider a working capital loan or line of credit.
Case Study: Freight Factoring in Action
A Brampton-based carrier with five trucks was waiting 60 days for shippers to pay. They factored $100,000 in freight invoices:
- Advance: $90,000 (90%).
- Final balance released after customer payment: $10,000 minus fees.
- Result: The company kept up with fuel, payroll, and insurance, and even added another truck to take on new contracts.
FAQ: Freight Factoring in Canada
1. Is freight factoring a loan?
No. It’s the sale of unpaid freight invoices for cash.
2. How fast can I get paid?
Approval and funding timelines vary by lender, application completeness, and required conditions.
3. How much does it cost?
Fees are typically 1–3% of invoice value.
4. Do I need good credit?
No. The factor looks at your customers’ creditworthiness, not yours.
5. Can startups use freight factoring?
Yes — even new carriers can qualify if they work with creditworthy shippers or brokers.
6. What’s the difference between freight factoring and asset-based lending?
Factoring uses invoices only. Asset-based loans can be secured by trucks, trailers, or receivables.
Final Thoughts
Freight factoring is a lifeline for Canadian trucking companies. It transforms unpaid freight bills into working capital so fleets can focus on hauling loads, not chasing payments.
If your business needs faster access to cash flow, explore invoice and freight factoring through Mehmi Financial Group.
Want to compare factoring with other financing solutions? Contact our credit analysts today.
Are you looking for a truck? Explore our used inventory.