Learning Center
Freight factoring glossary
Every term a transportation factoring proposal can throw at you, defined in plain English — with the follow-up question worth asking. Definitions describe common industry usage; your agreement's exact wording controls.
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Written and reviewed by the HaulFund editorial team · Published · Last reviewed
Educational information for transportation businesses. Not legal, tax or financial advice.
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Short answer
Factoring proposals are priced in language, not just numbers. The advance rate tells you what is funded up front, the reserve is your money held back, the recourse period sets how long an unpaid invoice stays the provider's problem, and the NOA and UCC-1 define who your customers pay and who has a claim on your receivables. This glossary defines 93 of those terms.
Key takeaways
- Compare effective rate — every fee actually deducted — not the headline factoring rate.
- Advance rate, gross advance and net cash are three different numbers; reserve is yours, held back.
- Recourse period, chargebacks and fraud provisions define who eats an unpaid invoice.
- Auto-renewal, notice period and termination fees decide how expensive it is to leave.
- NOA, UCC-1 and payoff letters control the mechanics of getting paid and of switching providers.
Showing 93 of 93 terms
1
- 100% advancealso called no-reserve factoringAdvance and reserve
- A structure with no reserve holdback, where the fee is simply deducted from the full invoice. Simpler to reconcile, but the fee is usually higher than a reserve-based program.
A
- AccessorialsFreight and industry
- Charges beyond linehaul, such as detention, layover, lumper reimbursement or TONU. They are a frequent source of short pays when they are not on the rate confirmation.
- Advance rateAdvance and reserve
- The share of the invoice face amount paid to you up front, commonly quoted somewhere in the 85–97% range depending on the provider, freight type and credit quality. The remainder is held as reserve, not kept as profit. Estimate advance and net cash →
- Aging reportalso called A/R agingRisk and credit
- A schedule of unpaid invoices grouped by how old they are, typically in 30-day buckets. Providers use it in underwriting, and you should use it to spot brokers drifting past terms.
- AssignmentPaperwork and process
- The transfer of your right to be paid on an invoice to the factoring provider. Assignment is what makes the provider, not you, the party the customer must pay.
- Auto-renewalalso called evergreen clauseContract terms
- A clause that renews the contract for another full term unless you give written notice inside a specific window. Missing that window by days can commit you for another year.
- AvailabilityAdvance and reserve
- The amount you can draw right now, given your facility limit, outstanding funded invoices and any credit holds. Availability, not the facility limit, is what constrains a busy week.
B
- Bill of ladingalso called BOLPaperwork and process
- The document evidencing receipt and delivery of freight, typically signed at the consignee. A clean, signed BOL is the usual proof of delivery required to fund an invoice.
- Bond claimalso called BMC-84 claimRisk and credit
- A claim against a freight broker's surety bond when the broker fails to pay. Bonds are limited in amount and shared among claimants, so recovery is often partial.
- Broker credit scoreFreight and industry
- A third-party rating estimating how reliably a freight broker pays and how quickly. Providers layer their own payment experience on top of it when setting debtor limits.
- BuyoutSwitching providers
- A new provider paying off your outstanding balance with the current one so the account and lien can transfer. The economics of a buyout — who covers the fees and how the reserve settles — decide whether switching pays. How to switch providers →
- Buyout periodSwitching providers
- The transition window during which invoices are split between the outgoing and incoming provider. Cash flow can tighten here, so plan for it rather than discovering it.
C
- ChargebackContract terms
- The provider recovering a funded invoice that went unpaid, was disputed or fell outside the agreement, usually by deducting from your reserve or from the next funding. Understanding how and when chargebacks apply is the core risk in any factoring program.
- Client portalPaperwork and process
- The provider's web or mobile system for submitting loads, running credit and tracking funding status. Ask for a live demo before signing, not a slide deck.
- CollectionsPaperwork and process
- The work of chasing payment from brokers and shippers, which the provider takes over on factored invoices. Approach matters: professional follow-up protects the customer relationship you still have to haul for.
- Concentration limitAdvance and reserve
- A cap on how much of your funded balance can sit with a single customer, often expressed as a percentage of the total. Carriers who run mostly for one broker hit this before they hit the facility limit.
- Confidential factoringalso called non-notification factoringContract terms
- An arrangement where customers are not notified that invoices are assigned. It is uncommon in trucking, where notice of assignment is standard practice.
- Contract termalso called initial termContract terms
- The committed length of the agreement, often 6, 12 or 24 months. Month-to-month structures exist, and the term interacts directly with termination fees.
- Credit check feePricing and fees
- A charge for running a broker or shipper through the provider's credit process. Many providers include a number of free checks; ask where the free allotment ends.
- Credit holdRisk and credit
- A suspension of funding for a particular debtor, often after slow payment or a deteriorating credit file. Loads already delivered for that broker may sit unfunded.
- CreditworthinessRisk and credit
- The provider's assessment of a broker's or shipper's ability and history of paying. Days-to-pay data, bond status and public filings all feed into it.
- Cross-collateralizationContract terms
- A clause letting the provider apply your reserves or receivables against amounts owed on other accounts or affiliated entities. It can pull a second business into a problem on the first.
D
- Days sales outstandingalso called DSORisk and credit
- The average number of days your invoices take to get paid. It drives your working-capital gap and, under tiered pricing, your real cost of factoring.
- Debtoralso called account debtor, payorRisk and credit
- The party who owes the invoice — usually the freight broker or shipper. In factoring, credit is underwritten on the debtor, not primarily on you.
- Debtor approvalalso called credit approvalRisk and credit
- The provider's decision to fund invoices for a specific broker or shipper, and up to what amount. Always run credit before you accept a load you plan to factor.
- DetentionFreight and industry
- Compensation for time held at a shipper or receiver beyond the free window. It must be documented to survive verification and collection.
- DilutionRisk and credit
- The share of invoiced dollars that never gets collected because of deductions, claims, short pays or credits. High dilution pushes advance rates down and pricing up.
- Direct factoring provideralso called factor, factoring companyFreight and industry
- The company that actually purchases invoices, underwrites debtors and releases funds. Terms, timing and eligibility are set by the provider and are subject to its approval.
- DisputeRisk and credit
- A customer's objection to an invoice on service or documentation grounds. Disputed invoices are commonly excluded from non-recourse protection and can be charged back.
- Double brokeringRisk and credit
- Re-brokering a load to another carrier without authorization. It creates disputed ownership of the receivable and is a common cause of chargebacks and account termination.
E
- Effective ratePricing and fees
- The total of every fee actually deducted, expressed as a percentage of the invoices funded. It is the only number that compares two proposals fairly, because headline rates exclude wire, ACH, setup and monthly charges. Compare offers side by side →
- Escrow reserveAdvance and reserve
- A cumulative cushion, often a small percentage of every invoice, that the provider holds against future chargebacks. It is typically returned only after the account closes and all invoices settle.
- Event of defaultContract terms
- The list of conditions that let the provider accelerate obligations or stop funding, such as misdirected payments, insurance lapse or authority revocation. Read this list before signing, not after.
F
- Facility limitalso called funding line, credit facilityAdvance and reserve
- The maximum total of funded invoices a provider will carry for you at one time. Growing fleets should ask how and how often the limit gets reviewed.
- Factoring agreementalso called factoring contract, master purchase agreementContract terms
- The contract governing the sale of your receivables, including pricing, term, security interests and remedies. Everything a salesperson says should appear in it. Contract Center →
- Factoring brokerFreight and industry
- A firm that helps a carrier compare factoring options from independent third-party providers rather than funding invoices itself. HaulFund operates as a broker and does not make credit, approval or funding decisions. What a factoring broker does →
- Factoring ratealso called discount rate, factoring feePricing and fees
- The percentage a factoring provider charges to purchase an invoice. It may be quoted as a flat rate for a set number of days or as a tiered rate that increases the longer the invoice stays unpaid. How factoring rates work →
- First positionalso called priority lienPaperwork and process
- Being the earliest perfected secured party on a given collateral pool. Factoring providers generally require first position on receivables, so earlier blanket liens must be released or subordinated.
- Flat ratePricing and fees
- A single fee charged per invoice regardless of how long the customer takes to pay, usually within a stated window. Easy to model, but the window and what happens after it matter more than the headline number.
- Float daysalso called clearance daysPricing and fees
- Extra days added to an invoice's age after the customer's payment arrives, before the reserve is released or the clock stops. A few float days can quietly raise the effective rate.
- Fraud provisionRisk and credit
- Contract language making you fully responsible for invoices that are not valid — double-brokered, undelivered, duplicated or altered. These provisions survive even under non-recourse programs.
- Freight billalso called invoiceFreight and industry
- The invoice for a completed load, showing linehaul, accessorials and load references. It is the asset being sold in a factoring transaction.
- Fuel advancealso called load advance, pre-advancePricing and fees
- Cash released against a load after dispatch but before delivery paperwork is in. It carries its own fee, usually a flat dollar amount or a percentage of the advance.
- Funding feealso called wire fee, ACH feePricing and fees
- A per-transaction charge for moving money to your bank. Wires typically cost more than ACH, and same-day wires may cost more again.
G
- Gross advanceAdvance and reserve
- The advance rate applied to the invoice before any fees are deducted. It is not the amount that hits your bank account.
I
- InsolvencyRisk and credit
- A debtor's inability to pay its debts, sometimes formalized through bankruptcy. Most non-recourse coverage is triggered by defined insolvency events rather than ordinary slow payment.
- Invoice processing feePricing and fees
- A per-invoice charge on top of the factoring rate, sometimes described as a document, imaging or upload fee. On small loads it can rival the factoring fee itself. Fees that hide in the fine print →
- Invoice schedulealso called schedule of accounts, assignment schedulePaperwork and process
- The batch document listing the invoices you are selling in a submission. Signing it is the act that assigns those specific receivables.
L
- Lien releaseSwitching providers
- The outgoing provider's filing that clears its UCC from your receivables. Until it lands, a new provider generally cannot take first position.
- LockboxPaperwork and process
- The bank account or address where customers remit payment on factored invoices. It is controlled by the provider so payments cannot be misdirected.
- Lockbox feePricing and fees
- A monthly or per-item charge for the bank account or PO box where your customers remit payment. It funds the collection infrastructure and is usually a small but permanent line item.
- Lumper feeFreight and industry
- A charge for third-party loading or unloading, usually reimbursed by the broker with a receipt. Some providers advance lumper costs; ask whether yours does and at what fee.
M
- Misdirected payment feePricing and fees
- A penalty charged when a customer pays you directly instead of the factoring provider on a factored invoice. Some agreements charge a percentage of the payment, so check the number and the cure period.
- Monthly minimumalso called minimum volume, minimum feePricing and fees
- A floor on the volume you factor or the fees you pay each month. If you fall short, you may be billed the difference, which turns a slow month into a fixed cost.
N
- Net cashalso called initial cash, net fundingAdvance and reserve
- What actually lands in your account on the first funding: the gross advance minus the factoring fee and any per-transaction charges. Estimate advance and net cash →
- NOA rescissionalso called release of assignmentSwitching providers
- The notice telling your customers to stop paying the old provider and start paying the new one. Sequencing this correctly is what prevents misdirected payment fees during a switch.
- Non-recourse factoringContract terms
- A structure where the provider absorbs certain non-payment losses, most often when an approved customer becomes insolvent. Coverage is defined narrowly in the agreement, so the exclusions matter more than the label. Recourse vs non-recourse →
- Notice of Assignmentalso called NOAPaperwork and process
- A written notice telling your customer that invoices have been assigned and payment must go to the factoring provider. Paying anyone else after receiving an NOA generally does not discharge the customer's obligation. How an NOA works →
- Notice of terminationSwitching providers
- The written notice ending the agreement, delivered by the method and deadline the contract specifies. Send it exactly as the contract requires and keep proof of delivery. Switching checklist →
- Notice periodContract terms
- How far in advance you must give written notice to end the agreement without renewing, commonly 30 to 90 days before term end. Put the date on a calendar the day you sign.
O
- Owner-operatorFreight and industry
- A driver who owns and operates their own truck under their own authority or leased on to a carrier. Cash-flow timing matters most here, because one slow broker can cover a whole week of fuel. Owner-operator factoring →
P
- Payoff letteralso called payoff quoteSwitching providers
- A written statement from your current provider of the exact amount required to close the account as of a stated date, including fees and outstanding advances. Ask for the expiration date, because payoff figures go stale.
- Personal guarantyalso called PG, validity guarantyContract terms
- A promise by an owner to be personally responsible for obligations under the agreement. A validity guaranty is narrower, covering fraud and invoice validity rather than a customer's failure to pay.
- Proof of deliveryalso called PODPaperwork and process
- The delivery evidence a provider requires before funding, usually the signed BOL plus supporting documents. Missing or illegible PODs are the most common reason a funding stalls.
Q
- Quick payFreight and industry
- A broker's own offer to pay a load early for a discount off the linehaul. It is per-broker and per-load, unlike factoring, which covers your whole book. Factoring vs quick pay →
R
- Rate confirmationalso called rate conPaperwork and process
- The broker's written agreement setting the load's rate and terms. Providers match it against the invoice, so a mismatch on accessorials invites a short pay.
- RebateContract terms
- A return of part of the fee or reserve to you, sometimes on invoices that pay unusually fast. Whether one exists, and how it is calculated, should be in writing.
- Recourse factoringContract terms
- A structure where you remain responsible for an invoice the customer does not pay, typically after a stated number of days. Usually priced lower than non-recourse. Recourse vs non-recourse →
- Recourse periodContract terms
- The window, commonly 60 to 120 days from invoice date, after which an unpaid invoice can be charged back to you. A shorter period puts pressure on slow-paying brokers.
- Recourse reserve chargebackFreight and industry
- The practical outcome when an invoice ages past the recourse period: the provider recovers the funded amount out of reserve or a future funding. Modeling this is how carriers avoid a surprise short week.
- Remittance advicePaperwork and process
- The statement showing which invoices a customer's payment covers and any deductions taken. It is how short pays and unapplied cash get identified.
- Reservealso called holdback, reserve accountAdvance and reserve
- The portion of the invoice held back until your customer pays. It is your money being held, and the release timing and deductions are the parts worth negotiating.
- Reserve holdback on exitSwitching providers
- Reserves the outgoing provider keeps after termination until remaining invoices clear the recourse window. Get the release schedule in writing before you send notice.
- Reserve releaseAdvance and reserve
- The payment of the held-back balance after the customer settles the invoice, less any fees or chargebacks. Ask whether releases run daily, weekly or on a cycle.
- Right of offsetalso called setoffContract terms
- The provider's right to deduct what you owe them from money they hold for you. It is the mechanism behind chargebacks and fee collection.
S
- Same-day fundingPaperwork and process
- Funding released on the same business day a complete, verified submission is received before the provider's cutoff. Availability, cutoff times and fees vary by provider and are subject to approval.
- Same-day funding feePricing and fees
- A premium for pushing funds outside the standard batch, typically by same-day wire. Confirm the daily cutoff time, because a missed cutoff means next business day regardless of the fee.
- Selective factoringalso called spot factoringContract terms
- Factoring only the invoices you choose, load by load or customer by customer. Higher rates are common, and minimums may still apply.
- Setup feealso called origination fee, application feePricing and fees
- A one-time charge to open the account, sometimes covering UCC filing and document preparation. Ask whether it is refundable if you are approved but never fund.
- Short payRisk and credit
- A customer paying less than the invoiced amount, often citing a detention dispute, late delivery, lumper discrepancy or rate confirmation mismatch. The gap usually becomes your problem through the reserve.
- Shortfall feealso called minimum deficiency feePricing and fees
- The charge applied when your factored volume lands under a contractual monthly or annual minimum. Ask exactly how it is calculated and whether it is assessed monthly or trued up at year end.
- Small fleetFreight and industry
- Typically a carrier running roughly two to ten power units. Fleets in this range often outgrow the pricing and limits of a starter program before they realize it. Small fleet factoring →
- Sub-limitAdvance and reserve
- A per-debtor credit ceiling. Once a broker's outstanding invoices reach that ceiling, additional loads for that broker may not be funded until earlier invoices pay.
- Subordination agreementalso called intercreditor agreementPaperwork and process
- A document in which an existing lienholder agrees to step behind the factoring provider on specified collateral. It is how a carrier with an equipment lender still qualifies.
T
- Termination feealso called early termination fee, ETF, break feeContract terms
- The cost of exiting before the term ends, sometimes a flat amount and sometimes the remaining minimums for the balance of the term. It is one of the largest hidden numbers in factoring. Termination fees explained →
- Tiered ratealso called variable rate, step ratePricing and fees
- Pricing that increases in steps as an invoice ages, for example one rate through day 30 and an additional charge every 10 or 15 days after that. Slow-paying brokers make tiered pricing considerably more expensive than the advertised rate. How factoring rates work →
- TONUalso called truck ordered not usedFreight and industry
- A payment for a load cancelled after you were dispatched. Because there is no BOL, funding a TONU invoice depends on the provider's documentation rules.
U
- UCC-1 financing statementalso called UCC filing, UCC-1Paperwork and process
- A public filing that records a secured party's interest in collateral, usually your accounts receivable. Factoring providers file one to perfect their interest and establish priority. UCC filings in factoring →
- UCC-3 terminationalso called UCC releasePaperwork and process
- The filing that releases a UCC-1 once the relationship ends and obligations are satisfied. Until it is filed, the old lien can block a new provider, an equipment loan or a line of credit.
V
- VerificationPaperwork and process
- The provider confirming with the customer that the load was delivered and the invoice is approved for payment. How aggressively verification is done affects both funding speed and your broker relationships.
W
- Whole ledger factoringalso called all-in factoringContract terms
- A requirement to factor every invoice you issue rather than picking loads. It usually earns better pricing but removes flexibility on the customers who already pay fast.
- Working capital gapFreight and industry
- The stretch between paying for fuel, drivers and repairs and getting paid on the load. Closing that gap is the entire economic case for factoring. How factoring works →
Browse by category
Pricing and fees
Factoring rate, Flat rate, Tiered rate, Effective rate, Funding fee, Setup fee, Monthly minimum, Shortfall fee, Misdirected payment fee, Credit check fee, Lockbox fee, Invoice processing fee, Fuel advance, Same-day funding fee, Float days
Advance and reserve
Advance rate, Gross advance, Net cash, Reserve, Reserve release, Escrow reserve, 100% advance, Availability, Facility limit, Concentration limit, Sub-limit
Contract terms
Factoring agreement, Recourse factoring, Non-recourse factoring, Recourse period, Chargeback, Rebate, Whole ledger factoring, Selective factoring, Contract term, Auto-renewal, Notice period, Termination fee, Personal guaranty, Cross-collateralization, Right of offset, Event of default, Confidential factoring
Risk and credit
Debtor, Debtor approval, Credit hold, Days sales outstanding, Aging report, Dilution, Short pay, Dispute, Creditworthiness, Bond claim, Insolvency, Fraud provision, Double brokering
Paperwork and process
Notice of Assignment, UCC-1 financing statement, UCC-3 termination, First position, Subordination agreement, Bill of lading, Proof of delivery, Rate confirmation, Invoice schedule, Verification, Lockbox, Remittance advice, Client portal, Collections, Assignment, Same-day funding
Switching providers
Buyout, Payoff letter, Buyout period, Reserve holdback on exit, Notice of termination, Lien release, NOA rescission
Frequently asked questions
- What is a Notice of Assignment (NOA) in trucking factoring?
- An NOA is a written notice telling your customer that your invoices have been assigned to a factoring provider and that payment must be sent to the provider. Once a customer receives it, paying anyone else generally does not discharge their obligation on that invoice.
- What is the difference between advance rate and net cash?
- The advance rate is the percentage of the invoice face amount funded up front, before fees. Net cash is what actually reaches your bank: the gross advance minus the factoring fee and any wire or ACH charges. The remaining balance is reserve, released after your customer pays.
- What is a recourse period?
- The recourse period is the window — commonly 60 to 120 days from the invoice date — after which an unpaid invoice can be charged back to you. Length varies by provider and by agreement.
- What is a buyout in factoring?
- A buyout is when a new factoring provider pays off the balance owed to your current provider so the account and the UCC lien can transfer. The payoff letter states the exact amount required as of a specific date.
- Is a UCC-1 filing bad for my business credit?
- A UCC-1 is a public notice that a secured party has an interest in specific collateral, usually your receivables. Business credit reports commonly display it, and individual lenders weigh it differently. This is general information, not legal advice.
Legal information notice. This content is provided for general educational purposes and is not legal advice. Contract rights, UCC matters, termination requirements, and factoring obligations depend on the applicable agreement, facts, and law. Businesses should consult qualified legal counsel regarding their specific circumstances.
HaulFund is a factoring broker and is not a direct lender or factoring provider. HaulFund connects businesses with independent third-party factoring providers. HaulFund does not make final credit, underwriting, approval, or funding decisions. Rates, fees, advance amounts, funding times, contract terms, and eligibility vary by provider and are subject to provider approval.
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