Freight factoring calculator
Enter your invoice details and the factor's quote to see your advance, reserve release and the annualised cost of factoring versus waiting for payment.
Your results
Estimate only, not financial, tax or legal advice. Check your own figures and contracts before relying on it.
How freight factoring works
- You deliver the load and invoice the broker or shipper for the full amount.
- You sell the invoice to the factoring company. It verifies the load was delivered and advances you a percentage of the face value — usually 80–97% — the same day or next business day.
- The debtor pays the factor directly on the invoice's net terms (30, 45 or 60 days).
- The factor releases the reserve to you: the held-back percentage minus the factoring fee.
How the calculator works
- Advance = invoice × advance rate. This is the cash you receive today.
- Fee = invoice × factoring fee %. This is the total cost of factoring.
- Reserve release = (invoice × (1 − advance rate)) − fee. If the fee is larger than the reserve, the reserve release is zero; the factor simply keeps the reserve and some of the advance covers the remainder.
- Net received = invoice − fee. The total you receive across both disbursements.
- Annualised cost = (fee ÷ advance) × (365 ÷ days to payment). This converts the flat fee into a rate comparable to a bank loan or line of credit.
Worked example
You invoice a broker $5,000 on net-45 terms. A factoring company offers a 95% advance at a 3% fee.
- Advance today: $5,000 × 0.95 = $4,750
- Fee: $5,000 × 0.03 = $150
- Reserve held back: $5,000 × 0.05 = $250
- Reserve released when broker pays: $250 − $150 = $100
- Net received total: $4,750 + $100 = $4,850 (or $5,000 − $150)
- Annualised cost: ($150 ÷ $4,750) × (365 ÷ 45) = 3.16% × 8.11 ≈ 25.6%
A 3% flat fee feels modest, but at 45-day terms it equates to a 25.6% annualised rate — more than twice a typical business line of credit. On 30-day terms the same 3% fee annualises to 38.4%.
Factoring versus a line of credit
Factoring has two advantages: it approves based on your customers' credit, not yours, and it scales automatically with your invoice volume. A line of credit is usually cheaper in annual-rate terms but requires a credit check, takes longer to set up, and may have draw limits.
If you already use factoring in your load pricing, the load profit calculator has a factoring fee field — enter the fee percentage there to see its impact on your profit per mile before you accept the load.
What this calculator does not cover
- Additional fees. Some factors charge ACH or wire fees, monthly minimums, or fuel-advance fees on top of the stated factoring rate. Add those to the fee field for a complete comparison.
- Non-payment risk. With recourse factoring, if the debtor does not pay you must repurchase the invoice. That risk is not modelled here.
- Fuel advances. Many factors offer a same-day fuel advance against pending loads. Treat the advance fee as a separate transaction and run it through the calculator on its own.
Results are estimates based on what you enter, not financial advice. Terms vary by factor and by debtor quality.
Frequently asked questions
What is freight factoring?
Freight factoring is when you sell an unpaid invoice to a factoring company in exchange for an immediate cash advance. The factor collects from the shipper or broker directly and sends you the remainder, minus its fee, once they pay.
What is a typical freight factoring rate?
Factoring fees for trucking typically range from 1% to 5% of the invoice face value per transaction, though some companies charge more for non-recourse arrangements or risky debtors. The rate alone does not tell you the true annual cost — that depends on how quickly your customers pay.
What is recourse versus non-recourse factoring?
With recourse factoring, if the debtor does not pay, you must buy the invoice back. With non-recourse factoring, the factor absorbs the bad debt — but charges a higher fee for that protection. The calculator works for either structure; just enter the fee you are quoted.
What does advance rate mean?
The advance rate is the percentage of the invoice the factor pays you immediately. A 95% advance on a $5,000 invoice means you receive $4,750 today. The remaining 5% ($250) is held as a reserve and returned to you, minus the fee, once the debtor pays.
How does the annualised rate compare to a business loan?
Factoring fees look small (3% feels modest), but because invoices turn over in 30–60 days the annualised cost is often 20–40%. A business line of credit at 10% APR is usually cheaper — but only if you can qualify and draw it fast enough. Use this calculator to see the real annual cost before deciding.