The U.S. trucking industry generated around $906 billion in revenue in 2025. Yet the money you make isn’t instantly in your hands. It’s an industry where payment often comes months after you finish the job. Until you’re paid, the money spent on fuel, equipment wear and tear, wages, and transportation costs takes a bite out of your bottom line.
If you’re finally paid two months later and discover the broker deducted 20% due to a late delivery in a situation that was out of your control, it’s painful. You’re out of the money you were expecting. Protect your company. Mitigate chargeback and deduction risks by partnering with a freight factoring company.
Why Chargebacks and Deductions Happen
When you sign up with a freight factoring company, you get paid immediately after a job. You deliver a load. You send your bill of lading to a factor and request payment. You get payment minus the freight factoring fee.
Sometimes, your client deducts funds from the invoice amount. Sometimes, they don’t pay at all. When this happens, a chargeback occurs. You must repay the amount you were advanced.
Why would a client deduct from the amount owed? There are several reasons.
- Diminished Shelf Life: Reefers must maintain temperatures within a specific range to ensure that produce, frozen goods, and other perishables aren’t affected on the road. If the temperature strays from the normal range, a chargeback may be issued.
- Invoice Errors: An error on the invoice, such as an incorrect address or per-mile rate, results in an incorrect payment amount.
- Lack of Proof: A bill of lading didn’t have a date/time stamp or signature. If that happens, there’s no proof the delivery happened.
- Late Delivery: Something happened, and the driver was late. Some companies are strict about timely deliveries, and even a 10-minute delay counts against your driver. It could be a delay beyond your driver’s control, such as an accident that closed a road, wintry roads that required slower, cautious driving, or a long line at the loading dock.
- Missing Paperwork: Missing receipts often lead to deductions. If a third party helped unload the truck, but no one obtained or submitted the lumper receipts, the broker or shipper won’t cover the cost without proof.
- Over, Short, and Damaged (OS&D): After the delivery, the client found that the pallet count didn’t match what you showed as delivered. A box might have damage that wasn’t visible at the time of delivery. The receiver opts to make a short payment (deduction) until the claim is settled.
Chargebacks also happen if your client doesn’t pay the invoice due to insolvency. IFA Commercial Factoring Magazine reports that about 20% of freight brokerages shut down between 2022 and 2024. Some had long histories and surprised the trucking industry when they closed for good.
Make Sure Your Paperwork Protects You
When you make a payment request, you need supporting documents. You need evidence of delivery. There are three ways to protect yourself.
- Get receipts for all lumper fees and get them approved ASAP. Email or text with a picture of the signed receipt is essential.
- Have drivers take multiple photos of the load’s condition at both pickup and delivery.
- Make sure the bill of lading is dated, time-stamped, and signed by all appropriate parties.
Mitigate Risk by Embracing Freight Factoring
Many freight factoring companies offer business credit checks as a benefit of factoring. Embrace this feature. Before you agree to deliver items for a broker or shipper, run a credit check. If there’s a high risk of late payments or disputed payments, steer clear of them.
Factoring also requires all paperwork upfront. When you submit a payment request, supporting documents are sent at the same time. Invoices must pass the approval process before payment is sent. With a complete payment request, your invoice won’t be missing information or have errors.
Freight factoring companies offer non-recourse factoring arrangements. If a client fails to pay an invoice due to bankruptcy or an unexpected closure, you keep the money you received in advance.
With non-recourse arrangements, a chargeback won’t occur. While it won’t protect you from damage to the freight or late deliveries, it does protect you from clients in financial distress or insolvency.
Partnering With the Right Factoring Company
Make sure the freight factoring company you partner with specializes in trucking. As you narrow down your final choice, compare non-recourse factoring rates. They’re higher than recourse rates, but the added protection is worth the extra cost.
As you build a factoring agreement, use this checklist to ensure it protects your interests.
- Additional Benefits: If you sign up, what additional benefits do you get? Unlimited free business credit checks help you exercise caution before agreeing to haul freight for a broker or shipper for the very first time.
- Advance Rates: Ensure the advance rate is competitive. The higher the advance rate, the better it is for you. Just make sure you’re not trading a higher advance rate for hidden fees.
- Contract Length: How long are you locked into the freight factoring agreement? Does it renew automatically? What is the penalty if you cancel without sufficient notice or before the contract ends?
- Cure Periods: If there is a dispute, how long do you have to resolve it before a chargeback occurs?
- Exclusivity: Are you free to choose which jobs go to the factoring company for immediate payment, or do you have to send every client to the factor for processing?
- Factoring Fee: See if it’s a flat fee or a tiered fee that increases every 15 to 30 days.
- Hidden Costs: Are there any hidden fees, such as administrative, bank transfer, credit check, or invoice processing fees?
- Incorrect Payment: If the client accidentally pays your company instead of the freight factor, are you penalized? Do you simply alert them and forward the funds?
- Reserve: How much money can the factor hold in a reserve account? Is there a cap?
- Minimum Volume Requirement: Do you have to factor a specific number of invoices each month? If you don’t meet that minimum, what is the penalty?
Saint John Capital has decades of experience in the trucking industry. Our arrangements are customized to meet your needs, and we help you set up factoring agreements that protect you from unexpected closures and bankruptcies.
