Start with the plain arithmetic
Take a truck running $18,000 a month in gross revenue, factoring everything.
- At 1.5%: $270 a month, $3,240 a year.
- At 3%: $540 a month, $6,480 a year.
- The difference: $3,240 a year, per truck.
On a single $2,000 invoice the gap is thirty dollars, which is why it is easy to wave away at signup. Across a year it is a major service, a set of tyres, or most of an insurance renewal.
For a five-truck fleet the same spread is over sixteen thousand dollars a year, for an identical service.
The rate is often not where the money goes
A headline rate is the most visible number and frequently not the largest cost. The things that quietly cost more:
- The reserve. Many agreements advance 90–95% and hold the rest until the broker pays. That is normal. What matters is how quickly the reserve is released, and whether anything is deducted from it on the way out.
- Per-invoice fees. An ACH or wire fee of $15–$35 per invoice is close to invisible on a rate sheet and substantial across 60 invoices a month.
- Monthly minimums. A minimum volume commitment charges you for factoring you did not use, which hits hardest in exactly the slow month you could least afford it.
- Termination and notice. A 60- or 90-day notice period, sometimes auto-renewing, can trap you in a rate you have already outgrown.
- All-or-nothing terms. An agreement demanding your entire book stops you keeping your fast-paying brokers on direct billing.
- Chargeback terms. On recourse, how long do you have before an unpaid invoice comes back, and does it come back with fees attached?
Recourse versus non-recourse, honestly
Non-recourse carries a higher rate and is sold as removing your risk. Read what it actually covers. In most agreements non-recourse means the factor absorbs the loss if the broker becomes insolvent — a specific, relatively rare event.
It generally does not cover a broker who disputes the load, short-pays over a claimed service failure, or simply refuses and drags it out. Those are the ways carriers actually lose money on receivables, and they usually land back with you regardless of which product you bought.
If you are paying a premium for non-recourse, know precisely which events it covers. Ask for the clause. A factor who will not show it plainly has answered the question.
When the higher rate is the right answer
Sometimes it is. A newer carrier, a thin credit file, or a book weighted toward slow-paying brokers may not be offered 1.5% at all, and a higher rate with a factor who funds reliably beats a lower rate with one who queries every invoice.
Speed and reliability of funding have real value. A factor who pays same-day on a clean submission and answers the phone is worth paying for, if the alternative is a cheaper factor who takes four days and holds advances over document formatting.
The mistake is not paying 3%. The mistake is paying 3% without having checked what 1.5% would have required, and without knowing which of the two you are actually eligible for.
Worth reviewing annually
The rate you were offered as a new authority with no history is not the rate you are worth after two years of clean volume. Factors rarely volunteer a reduction.
Take the agreement out once a year, work out the true all-in cost including fees and reserve timing, and find out what you would be offered today. The conversation is free and the notice period is the only thing that makes it expensive to have late.