Freight Factoring Glossary: 100+ Factoring and Trucking Terms to Know

The money side of trucking comes with its own language. Rate cons, NOAs, reserves, recourse windows, short pays, TONU. Some of it comes from finance, some from freight, and a lot of it gets thrown around like everyone already knows what it means.

This freight factoring glossary puts it all in one place. It covers the factoring terms you’ll see in an agreement or hear from an account manager, plus the trucking and compliance terms that show up on the paperwork behind every invoice. Use it to brush up on the basics, check a term you’re not sure about, or walk into a conversation with a factoring company knowing exactly what you’re being offered.

Start here: the three parties in every factoring deal

Every factoring arrangement involves three parties. Different companies use different names for them, which is where a lot of the confusion starts.

Factoring company (factor) The company that buys your invoices. It pays you most of the invoice amount up front, then collects the full amount from your customer.

Client (carrier) That’s you: the trucking company that sells its invoices to the factor in exchange for faster payment.

Customer (debtor, account debtor) The company that owes payment on the invoice, usually a freight broker or shipper. Factoring agreements often call them the “debtor” or “account debtor.”

A

A/R aging report (aging schedule) A report showing every unpaid invoice, grouped by how long it’s been outstanding (for example 0–30, 31–60, 61–90, and 90+ days). Most factors give you access to one so you can see which customers are paying slowly.

Accessorial charges (accessorials) Charges on top of the linehaul rate for extra services or time, such as detention, layover, lumper fees, TONU, extra stops, or tarping. Accessorials should be agreed to on the rate confirmation or documented in writing, or they’re likely to be short-paid.

Accounts receivable (A/R) The money your customers owe you for loads you’ve already delivered and billed.

Accounts receivable financing A broad term for getting cash from your unpaid invoices. Factoring is one form; an A/R-based line of credit (where you borrow against your invoices instead of selling them) is another.

ACH transfer An electronic bank-to-bank payment through the Automated Clearing House network. Standard ACH usually lands in one to two business days; same-day ACH is also available. Typically cheaper than a wire.

Advance rate The percentage of an invoice the factor pays you up front when you submit it. The rest is held in reserve (or there is no reserve, depending on the program) until the customer pays. Example: On a $3,000 load with a 90% advance rate, you’d receive $2,700 up front (less any fee deducted at funding), with the remaining $300 released, minus the fee, once the broker pays.

Authority (operating authority) FMCSA’s permission for a business to operate as a for-hire interstate carrier. When people say a carrier has “its own authority,” they mean it runs under its own MC number rather than leased onto another carrier’s.

Average days to pay (DTP) The average number of days a customer takes to pay its invoices. Factors track it for every broker they buy from, and many will share it with you before you book a load.

B

Backhaul A load that takes a truck back toward its home base or the origin of its previous load, so it doesn’t return empty.

Bad debt An invoice that’s unlikely to ever be collected, usually because the customer went out of business or refuses to pay.

Bill of lading (BOL) The shipping document issued at pickup that lists what’s being hauled, how much, and where it’s going. It serves as a receipt for the freight. Once the receiver signs it at delivery, it becomes your proof of delivery. Most factors need a signed BOL to fund an invoice.

BMC-84 (broker bond) The $75,000 surety bond (or BMC-85 trust fund) that freight brokers must carry under FMCSA rules. If a broker fails to pay a carrier, a claim against the bond is one way to try to recover the money, though the bond is shared across all claimants.

BOC-3 The FMCSA filing that names a process agent in each state where you operate, so legal documents can be served on your company. It’s required before your operating authority becomes active.

Broker (freight broker) A company licensed by FMCSA to arrange transportation between shippers and carriers. Brokers don’t haul the freight themselves; they book it with carriers like you and pay you on agreed terms. For many carriers, brokers are the main customer on factored invoices.

Broker credit check A review of a broker’s payment history, days to pay, and financial health before you haul for them. Most factors offer this for free and set a credit limit for each broker.

Buy-back (repurchase) In recourse factoring, the requirement that the carrier buy back an invoice the customer hasn’t paid by the end of the recourse period. It’s usually handled by deducting the amount from future fundings or the reserve, or by swapping in a new invoice.

C

Cargo claim A claim against a carrier for freight that was lost, stolen, or damaged in transit. An open claim can lead a broker to hold or reduce payment on the invoice.

Cargo insurance Coverage that pays for damage to or loss of the freight you’re hauling. Many brokers set minimum cargo coverage amounts before they’ll tender a load.

Carrier A business that transports freight for hire, such as a trucking company or owner-operator.

Certificate of insurance (COI) A document from your insurance agent showing your coverage types and limits. Brokers and factors usually ask for a current COI during setup.

Charge-back An amount the factor deducts from your future fundings or reserve to cover an invoice that went unpaid, was disputed, or was short-paid.

Collections The work of following up with customers to get invoices paid in full and on time. With most factoring programs, the factor handles collections on the invoices it buys.

Concentration How much of your total billing comes from a single customer. High concentration means one or two customers make up most of your revenue, which raises risk for you and the factor. Example: If you bill $50,000 in a month and $30,000 of that comes from one broker, your concentration with that broker is 60%.

Consignee The person or business receiving the shipment at the destination.

Consignor The person or business sending the shipment. Also called the shipper.

Contract freight Freight hauled under a longer-term agreement at a set rate, often directly for a shipper. The opposite of spot freight.

Cost per mile (CPM) Your total operating costs (fuel, driver pay, truck payments, insurance, maintenance, tolls, overhead) divided by total miles driven, including empty miles. Knowing your CPM is the only way to know if a rate is actually profitable.

Credit limit The maximum amount of open invoices a factor will buy from a single customer at one time. It’s based on the customer’s credit, payment history, and how much business you do with them.

Credit score (business credit) A rating of a company’s ability to pay its bills. Factors look mostly at your customers’ business credit, not your personal credit score, when deciding which invoices to buy.

CSA (Compliance, Safety, Accountability) FMCSA’s safety enforcement program. It scores carriers across categories called BASICs (such as unsafe driving, hours-of-service compliance, and vehicle maintenance) using roadside inspection and crash data. Brokers and shippers often check CSA scores before booking a carrier.

Current assets Cash and other assets a business expects to turn into cash within 12 months, including accounts receivable.

Current liabilities Bills and other obligations a business must pay within 12 months, such as fuel cards, payroll, and the current portion of truck notes.

D

Days sales outstanding (DSO) The average number of days it takes your business to collect payment after a load is delivered. The higher your DSO, the more cash you have tied up in unpaid invoices.

Deadhead Miles driven with an empty trailer, usually to reach the next pickup. Deadhead miles cost money but don’t earn revenue, so they push your cost per mile up.

Debtor (account debtor) The customer who owes payment on an invoice, usually a broker or shipper.

Dedicated account manager A specific person at a factoring company who is your main point of contact for funding questions, broker issues, and account changes.

Detention Pay for time a driver waits at a shipper or receiver beyond the agreed free time, often after two hours. Detention terms should be on the rate confirmation, and you’ll typically need in/out times documented to get paid for it.

Discount rate Another name for the factoring fee: the percentage of the invoice amount the factor keeps as its fee.

Double brokering When a carrier or broker accepts a load and then illegally re-brokers it to another carrier without the shipper’s knowledge or proper authority. It’s a growing source of freight fraud and a common reason carriers don’t get paid.

Dispute When a customer refuses to pay all or part of an invoice because of a disagreement, such as missing paperwork, late delivery, damage, or a rate disagreement.

E

ELD (electronic logging device) A device connected to a truck’s engine that automatically records driving time for hours-of-service compliance. Required for most interstate commercial drivers.

F

Factoring agreement The contract between you and the factor. It spells out the advance rate, fees, recourse terms, any volume minimums, contract length, and how to end the relationship. Read it closely before you sign.

Factoring fee What the factor charges to buy your invoice, usually a percentage of the invoice amount. Some fees are flat; others increase the longer an invoice stays unpaid. Also called the discount rate. Example: On a $3,000 invoice with a 2.5% fee, the factoring fee would be $75. (Illustrative numbers only.)

Factor-all requirement A contract term requiring you to factor every invoice from every customer, rather than choosing which invoices to submit.

FMCSA (Federal Motor Carrier Safety Administration) The federal agency that regulates trucking companies and brokers, issues USDOT and MC numbers, and enforces safety rules.

Form 2290 (HVUT) The IRS form used to pay the Heavy Vehicle Use Tax on trucks with a taxable gross weight of 55,000 pounds or more. It’s filed annually, and you’ll need proof of payment (Schedule 1) to register your trucks.

Free time The amount of time a shipper or receiver gets to load or unload before detention starts, often two hours.

Freight bill Another name for the invoice a carrier sends to its customer for a load.

Freight factoring Selling your freight invoices to a factoring company to get paid now instead of waiting 30 to 60 days or more. The factor advances most of the invoice amount, collects from your broker or shipper, and charges a fee for the service. Also called trucking factoring.

Fuel advance Money a factor sends you before a load is delivered, usually to cover fuel to complete the trip. It’s typically a portion of the expected invoice and is deducted when the invoice is funded. Sometimes called a cash advance.

Fuel card A payment card used to buy fuel, often with per-gallon discounts at participating truck stops. Many factors offer fuel card programs to their clients.

Fuel surcharge (FSC) An extra charge added to a freight rate to offset changes in fuel prices, usually tied to the Department of Energy’s weekly diesel price average.

H

Hours of service (HOS) FMCSA rules that limit how long commercial drivers can drive and work. For property-carrying drivers, the core limits are 11 hours of driving within a 14-hour on-duty window after 10 consecutive hours off duty.

I

IFTA (International Fuel Tax Agreement) An agreement among U.S. states and Canadian provinces that simplifies fuel tax reporting for interstate carriers. You file a quarterly IFTA return showing miles driven and fuel purchased in each jurisdiction.

Invoice The bill you send your customer for a completed load, showing the agreed rate plus any accessorials.

Invoice verification The process a factor uses to confirm an invoice is valid before funding it, usually by checking it against the rate confirmation and BOL and sometimes by contacting the broker directly.

IRP (International Registration Plan) A program for registering trucks that travel in multiple states or provinces. You pay registration fees based on the miles driven in each jurisdiction and receive apportioned plates.

L

Layover Pay for a driver who’s held overnight or longer because a load wasn’t ready or couldn’t be delivered as scheduled.

Leased owner-operator (leased on) An owner-operator who runs under another carrier’s authority instead of their own. Leased owner-operators are typically paid by the carrier they’re leased to, so they don’t usually factor.

Letter of release (release of assignment) A document from your current factor that releases its claim on your invoices and receivables. You’ll need one to switch factoring companies, and new factors usually won’t fund until they have it.

Lien A legal claim on a business’s assets, such as receivables or equipment, as security for a debt or agreement. Factors typically file a lien on your receivables (see UCC-1).

Linehaul rate The base rate for moving a load from origin to destination, not including fuel surcharge or accessorials.

Liquidity How easily a business can cover its short-term bills, like fuel, insurance, payroll, and repairs, with cash on hand or assets it can quickly turn into cash.

Load board An online marketplace where brokers and shippers post available loads and carriers find freight.

Lumper fee A fee paid to a third-party crew that unloads freight at a warehouse or distribution center. Lumper fees are often paid by the carrier up front and reimbursed by the broker, so keep the receipt; factors usually need it to bill the charge.

M

Maintenance Ongoing work to keep trucks and trailers safe and on the road, from oil changes and tires to major repairs. Setting aside a per-mile maintenance fund is one of the best ways to avoid cash flow shocks when a big repair hits.

MC number The docket number FMCSA issues when it grants a carrier or broker operating authority for interstate for-hire transportation. Brokers and factors use it to verify who they’re working with.

MCS-150 The FMCSA form used to register for and update your USDOT number. Carriers must update it at least every 24 months, even if nothing has changed.

Monthly minimum (volume minimum) A contract term requiring you to factor a minimum dollar amount each month, often with a fee if you fall short.

N

Net terms (Net 30, Net 45) The number of days a customer has to pay an invoice. Net 30 means payment is due 30 days after the invoice date.

New entrant program FMCSA’s safety monitoring period for new motor carriers, which lasts 18 months and includes a safety audit. Some brokers limit the loads they’ll give to carriers with newer authorities.

Non-recourse factoring A factoring program where the factor takes on the loss if an approved customer doesn’t pay because of a credit failure, such as bankruptcy or insolvency. Non-recourse typically does not cover disputes, short pays, or paperwork problems, so always ask exactly what’s covered. It usually costs a bit more than recourse factoring.

Notice of assignment (NOA) A letter the factor sends to your customers telling them you’ve assigned your invoices to the factor and they should send payment to the factor instead of to you. A customer that pays you directly after receiving an NOA may still owe the factor.

O

Operating cash flow The cash your business generates from hauling freight, after paying the costs of running the trucks. It shows whether the business can sustain and grow itself without outside money.

Opportunity cost What you give up by choosing one option over another. In trucking, it’s often the good load, new customer, or extra truck you had to pass on because cash was tied up waiting on invoices.

OS&D (over, short, and damaged) Exceptions noted on the bill of lading at delivery when freight arrives with more or less than expected, or damaged. OS&D notes are a common reason a broker will short-pay or hold an invoice.

Owner-operator A driver who owns or leases their own truck and either runs under their own authority or leases onto another carrier.

P

Personal guarantee A promise that the business owner will personally cover certain obligations if the business can’t. Some factoring agreements and most business loans include one, so check whether yours does and what it covers.

Power unit A truck or tractor that pulls a trailer. Fleets are usually measured by number of power units, and FMCSA filings and UCR fees are based on it.

Primary auto liability insurance Insurance that covers injuries and property damage your truck causes to others. FMCSA requires at least $750,000 for most for-hire carriers of general freight, though many brokers require $1 million.

Proof of delivery (POD) The signed bill of lading or delivery receipt confirming the receiver got the freight. Factors need it to fund the invoice.

Q

Quick pay An option some brokers offer to pay carriers faster than their normal terms in exchange for a fee. Unlike factoring, it only applies to that broker’s loads and doesn’t include collections or credit checks.

R

Rate confirmation (rate con, load confirmation) The document the broker sends that confirms the load details and agreed rate, including pickup and delivery info and any accessorials. It’s signed by both the broker and the carrier, and factors use it to verify the invoice.

Rate per mile (RPM) What a load pays divided by the loaded miles (or total miles, including deadhead, depending on how you calculate it). Comparing RPM to your cost per mile shows whether a load makes you money.

Recourse factoring The most common type of factoring. If a customer doesn’t pay within the recourse period, you buy back the invoice or replace it with another one. It usually costs less than non-recourse factoring.

Recourse period (recourse window) In recourse factoring, how long the factor will wait for a customer to pay before you have to buy back the invoice, often 60 to 90 days from purchase. Also called the buy-back period.

Reefer A refrigerated trailer used to haul temperature-controlled freight.

Reserve (reserve account) The portion of an invoice the factor holds back until the customer pays, after which it’s released to you minus the fee. The reserve can also be used to cover charge-backs or short pays. Some programs have no reserve and pay the full amount less the fee up front.

S

Same-day funding When a factor pays you the same business day you submit a complete, verified invoice. Cut-off times and paperwork requirements apply, so ask your factor what they are.

Schedule of accounts The list of invoices you submit to the factor for funding, often as a batch.

Shipper The company that sends the freight. Also called the consignor.

Short pay When a customer pays less than the full invoice amount, often over a disputed accessorial, late delivery, OS&D, or a paperwork issue. A good factor will push back on short pays that aren’t justified.

Spot factoring Factoring a single invoice or a handful of invoices without committing to an ongoing agreement. Fees are usually higher than in a long-term program.

Spot market (spot freight) Loads booked one at a time at current market rates, usually through load boards or brokers. Spot rates move with supply and demand, so they can swing a lot from week to week.

T

Termination fee A fee charged for ending a factoring agreement before the contract term is up, or without the required notice.

TONU (truck ordered, not used) A fee paid to a carrier when a load is canceled after the truck has been dispatched or arrived at pickup. TONU pay should be confirmed in writing to get billed.

U

UCC (Uniform Commercial Code) A set of standardized laws that govern commercial transactions in the U.S., including how factors and lenders establish rights to a business’s receivables and other assets.

UCC-1 financing statement A public filing a factor or lender makes with the state to establish its claim (lien) on your assets, such as receivables. If you have an existing UCC-1 filing from a lender or merchant cash advance, a new factor may need it released or subordinated before funding.

UCR (Unified Carrier Registration) An annual federal registration that interstate carriers and brokers must complete. Carrier fees are based on fleet size in brackets (for example, 0–2, 3–5, and 6–20 power units), so your fee goes up as you add trucks.

Underwriting The process a factor uses to review your business and your customers before approving you, including your authority, insurance, safety record, and the creditworthiness of the brokers and shippers you haul for.

USDOT number A unique number FMCSA assigns to commercial motor carriers to identify them in safety records, audits, and inspections.

V

Verification See invoice verification.

W

Wire transfer An electronic transfer of funds that’s typically completed the same business day. Faster than standard ACH, but usually more expensive.

Working capital The cash available to run day-to-day operations, like fuel, insurance, payroll, and maintenance. Calculated as current assets minus current liabilities. Healthy working capital is what lets you cover a slow week, a big repair, or a new opportunity without stretching too thin.

Putting the terms to work with OpenRoad Financial

Knowing the language is the first step. The next is working with a factor who explains every term in your agreement in plain English, with no surprises later.

OpenRoad Financial has been doing trucking-exclusive factoring for 10 years. We don’t factor for other industries. That means:

• Straight answers about your agreement. Advance rate, fees, reserve, recourse terms. We’ll walk through all of it before you sign.
• Recourse and non-recourse options, with clear explanations of what each one covers and what it doesn’t.
• Broker credit checks before you haul, so you know who pays before your money is on the line.
• A collections team that fights for your money, from catching billing errors to pushing back on unjustified short pays.
• A real person to call when a load, a broker, or a payment needs attention.

Have a term you still want explained, or a factoring agreement you’d like a second set of eyes on? Talk to our team.