Several trucking companies shut their doors for good in 2025. Others filed for Chapter 11 bankruptcy and are trying to restructure their companies’ finances. With the trucking industry still trying to find its footing, there’s a high level of uncertainty.
If you agree to haul a load for a company, will they pay? What are the odds of them suddenly shutting their doors without warning? These questions have many trucking companies considering non-recourse freight factoring.
What Is Non-Recourse Freight Factoring?
Freight factoring is a financial arrangement specific to the trucking industry. A trucking company sells its unpaid invoices to a “factor” at a discount. That discounted rate, also known as a freight factoring fee, entitles the trucking company to an immediate cash advance.
When you set up freight factoring arrangements, you’re offered several options. One is whether you want a recourse or non-recourse factoring arrangement.
- Recourse – You must repay the advance if your client doesn’t pay the invoice as promised.
- Non-Recourse – You’re protected from having to repay the advance if certain situations arise.
Here’s a quick breakdown of how freight factoring works.
- Pick up or deliver a load and get a signed bill of lading (BOL).
- Submit your payment request and BOL to the freight factoring company, usually via an app or website.
- Wait for the factor to process your request.
- Get paid the money due minus the factoring fee as quickly as that afternoon.
- The factor invoices your client and awaits payment.
Some factoring arrangements withhold a portion of the money owed. This is an advance rate. It may range from 50%, if you submit a payment request when picking up the load, to 100% for requests made after delivery. If it’s a partial advance, the balance is paid when your client pays.
The arrangement you make impacts the factoring fee you pay. Because a non-recourse arrangement involves more risk on the factor’s behalf, rates are higher. If you are certain your client is solid and won’t shut down, recourse arrangements have lower fees because you shoulder the risk.
Considerations When Deciding Between Non-Recourse and Recourse Factoring
What’s important to consider is that non-recourse arrangements do not protect you from every situation. If your client doesn’t pay because you broke items or were late, you must return the advance you received. It only covers non-payment tied to insolvency, such as a business closure or bankruptcy.
Recourse factoring rates are lower. You need to make sure you’re okay with paying a bit more for the insurance against nonpayment. Suppose you’ve delivered several loads this month, and your client owes a total of $25,000. The Net-30 terms come and go, and you still haven’t been paid.
Non-recourse rates may be at the higher end of the 2% to 5% range, while recourse factoring is closer to 2%. The size of your fleet, your client’s credit score, and your advance rate also influence the factoring rate you’re offered.
You’re $25,000 short, and that makes it hard to pay your own bills. If you had a non-recourse factoring arrangement with a 5% factoring fee, you would have paid $1,250 in factoring fees.
That’s usually more favorable than credit card interest, late payment penalties, and damage to your business credit score. Bad credit leads to denied truck loans, business lines of credit, or higher interest rates.
Real Stories Where Non-Recourse Factoring Arrangements Saved the Day
Back in 2023, Convoy shut down, leaving hundreds of carriers waiting for payments. When Convoy abruptly shut down, it owed carriers over $2.5 million. Trucking company owners who paid a slightly higher factoring fee for protective non-recourse agreements didn’t have to worry about repaying advances.
Another company closed and filed for bankruptcy in 2023. Yellow Corp’s bankruptcy was shocking, given the company’s nearly 100-year history. When Yellow closed, smaller carriers that subcontracted with the company didn’t get paid. Carriers that opted for non-recourse arrangements kept the funds advanced by factoring companies.
Carefully Choose a Freight Factoring Partner
Choosing a freight factoring company is one of the most important financial decisions a trucking business can make. A bad contract can lock you into high fees and predatory terms, while a good one provides the cash flow needed to grow.
Use this checklist to vet potential partners before you sign anything.
1. Financials:
Advance rates are the percentage you get up front. Ideally, partner with a company like Saint John Capital that offers 100% advances. If you need money before you leave the loading dock, a 50% advance helps cover the cost of fuel on your way to your destination.
Make sure you read the fine print carefully. The rate you first notice may not be the final rate. There are often flat rates and variable rates. Variable rates increase if your client doesn’t pay within a specific period. Look for hidden fees, such as:
- ACH//bank wire fees
- Credit check fees
- Early termination fees
- Monthly volume minimums
- Processing fees
- Set-up fees
If you sign up, is there a free trial period where you can end your contract without paying a penalty or being locked in? It’s frustrating to discover a freight factoring company isn’t a good fit, and to be locked in for months or years.
If there is a required contract length, how long is it? Are you locked in for a month, six months, or a whole year? How far in advance do you have to give notice that you’re terminating the contract? Is the contract set up to auto-renew? How do you cancel an auto-renewal? Can you do it online, or do you have to call?
How is the factor going to talk to your clients if they’re late paying? You risk losing clients if aggressive collection tactics are the standard practice. You don’t want to lose valuable clients to misunderstandings or unintentional oversights.
Once you’re working with the factoring company, do you have to send every client’s invoice through the factoring company? If you have a trusted client that you want to continue invoicing on your own, is that allowed?
2. Benefits:
Freight factoring often adds additional services that benefit your company. Look for companies that offer:
- Fuel discounts
- Same-day payments
- TMS integration
- Unlimited business credit checks
- User-friendly app or mobile-friendly website accessible when you’re on the road
Saint John Capital is a trusted partner in non-recourse freight factoring agreements. In addition to the lowest rates, we offer multiple additional benefits. Using our years of experience in the trucking industry, we arrange benefits like fuel discounts that we know trucking company owners need.
