Freight Factoring vs Line of Credit

No. Freight factoring is not a loan. It is the sale of unpaid freight invoices in exchange for immediate cash. Because it is not borrowed money, it does not create traditional debt and does not charge interest like a line of credit. Instead, it accelerates revenue you have already earned.

In most cases, freight factoring does not impact your personal credit score. Approval is typically based on the creditworthiness of the broker or shipper, not the carrier. Since factoring is not a loan, it does not increase credit utilization the way a line of credit can.

The main difference is structure. A line of credit is borrowed money that charges interest and affects credit. Freight factoring converts unpaid invoices into immediate working capital without creating traditional debt. One is financing. The other is accelerated revenue.

Freight factoring typically provides faster access to working capital. Once set up, carriers can receive funding as soon as invoices are submitted. A line of credit often requires underwriting, approval processes, and ongoing bank review, which can delay access to funds.

Freight factoring is often more accessible for new authorities and small fleets because approval is based primarily on broker credit rather than the carrier’s financial history. A bank line of credit usually requires established credit history, financial statements, and stronger borrowing qualifications.

Yes. A line of credit is a loan and accrues interest on borrowed funds. Interest continues until the balance is repaid. Freight factoring does not charge interest because it is not borrowed capital — it is early payment on completed loads.

A line of credit may work well for established carriers with strong credit, steady financial history, and predictable borrowing needs. It can provide flexible capital access for long-term investments or planned expenses outside of invoiced freight revenue.