Freight glossary / Financial and settlement

What is Factoring in freight?

Factoring is selling a freight invoice to a third party at a discount in exchange for immediate payment instead of waiting the customer's full payment terms. Carriers use it because fuel and payroll are due long before a broker or shipper pays, and the discount is the price of closing that gap. Recourse factoring leaves the carrier liable if the customer never pays, while non recourse shifts that risk to the factor at a higher rate.

Also called: freight factoring, invoice factoring.

Related terms

• Quick pay
• Net terms
• Accounts receivable
• Notice of assignment