High operating costs and delayed payments make cash flow one of the biggest challenges for trucking companies. Freight factoring provides a reliable way to access working capital by advancing payment on your invoices. At Prime Factoring, we help carriers choose the right fee structure for their business so they can keep running without disruption. Understanding how flat and tiered rates work allows you to plan ahead, manage costs, and maintain steady financial performance.
What Are Freight Factoring Fees?
At its core, a freight factoring fee is the cost you pay to a factoring company for advancing payment on your freight invoices. This fee is typically a small percentage of the invoice total and is the primary way factoring companies earn revenue for their service.
Factoring fees can vary based on the structure you choose. The two most common options in the industry are:
- Flat Rates
- Tiered (Variable) Rates
Each model affects your cost and timing differently, which is why it’s important to understand both before locking into a factoring agreement.
Flat Rate Factoring: One Set Percentage
How It Works
With a flat rate, you’re charged a single percentage on the face value of each invoice, regardless of how long your customer takes to pay. This structure is simple, transparent, and easy to predict.
For example, if your flat rate is 3% and your invoice is $5,000, your fee is always $150, whether your customer pays in 15 days or 45 days.
Benefits of Flat Rates
- Predictable Costs: You always know what you’re paying.
- Simpler Accounting: No need to track timing to calculate your final cost.
- Ideal for Long-Term Planning: Works well for carriers who want consistent margins and easier budgeting.
When Flat Rates Make Sense
A tiered fee structure applies a lower rate when your customer pays quickly and a higher rate as the payment period increases. It works like a sliding scale, for example, you might pay 1.5% for invoices paid within 10 days, 2.5% for 20 days, and 3.5% for 30 days or more. The final fee is determined by the actual date the factoring company receives payment from your customer.
Tiered Rate Factoring: Cost Based on Days Outstanding
How It Works
A tiered fee structure charges a lower rate if your customer pays quickly, and a higher rate the longer it takes. Think of it as a sliding scale. You might pay 1.5% for invoices paid within 10 days, 2.5% for 20 days, and 3.5% for 30 days or more.
The final fee depends on when your customer submits payment to the factoring company.
Benefits of Tiered Rates
- Lower Initial Fees: If your clients pay quickly, you can save money compared to flat rates.
- Encourages Faster Payment: You might negotiate faster terms with your broker or customer to keep factoring costs low.
When Tiered Rates Are a Better Fit
We see tiered rates working well for mid-size fleets that haul for larger shippers or brokers with fast payment terms. If your customers are consistent and predictable with on-time payments, tiered rates can reduce your overall factoring expenses.
Comparing Flat and Tiered Rates Structure
| Feature | Flat Rate | Tiered Rate |
| Cost Predictability | High | Low |
| Best For | Long payment cycles | Quick pay clients |
| Simplicity | Very easy to manage | Requires tracking payment days |
| Potential Savings | Less likely | More likely if customers pay fast |
Other Cost Factors to Watch For
Additional Fees
Beyond the base freight factoring fee, some providers tack on other charges:
- Credit check fees
- ACH or wire fees
- Invoice processing or setup charges
- Minimum volume fees
At Prime Factoring, we’re upfront about all costs, so you’re never surprised. Make sure to ask for a full fee breakdown before signing any agreement.
Contract Terms
Look closely at contract length and termination clauses. Some factoring companies require 6–12 month commitments and charge early exit fees. We offer flexible contracts designed to meet the needs of both new and experienced carriers.
Final Thoughts: Choose the Right Fit for Your Fleet
When it comes to choosing a freight factoring fee structure, there’s no universal right answer. It depends on how fast your customers pay, what level of cash flow you need, and whether flat and tiered rates align with the simplicity you’re looking for.
At Prime Factoring, we walk you through every option. We explain the numbers clearly and help you weigh the total cost, not just the headline rate. Whether you’re an independent operator or managing a multi-truck operation, we’ll help you select the rate structure that works best for how you run your business.
Ready to compare your options? Contact us today and get a custom quote based on your routes, invoice volume, and client payment habits. We’re here to make freight factoring work for you.
