Reserve (factoring)

In practice

The reserve is your money, held as a cushion. The factor uses it to cover its fee and any shortfall: a short payment, a chargeback for damaged freight, or an invoice the broker never pays under a recourse contract. When the broker pays in full, the reserve comes back less the fee.

Watch three contract terms:

• How long reserves are held after the broker pays.
• Whether reserves are pooled across invoices, so one slow broker delays money from all of them.
• What can be deducted from a reserve, and how you are told.

A reserve is one more reason to keep paperwork clean. A rate con that doesn't match the invoice, or a missing signature on the bill of lading, slows payment, and the reserve waits with it. The same habit of reading every line applies to fuel surcharges: see what is a fuel surcharge in trucking, and keep an eye on semi truck mpg too, since fuel is what the cash usually goes to first.

Run the numbers on a factoring offer against a broker's quick pay with the quick pay vs factoring calculator. For the whole picture, including how to read a quote, see our freight factoring guide. More terms are in the trucking money dictionary.