Factoring reserves: the money you earned that you can't touch yet

Most factors don't advance 100% of an invoice. They advance, say, 90% and hold the rest as a reserve until the broker actually pays, then release your reserve minus their fee. That's normal and it protects them from funding an invoice that gets short-paid. It also means a slice of every dollar you earned is sitting in their account, not yours.

Two numbers decide how much this costs you: the reserve percentage and the release speed. A 10% reserve released the day the broker pays is barely noticeable. A 20% reserve released weekly in a batch, or held until month-end, ties up real working capital — the exact cash you'd use for fuel on the next load. For a thin operation, that drag can matter more than a half-point on the rate.

Ask two questions before signing: what's the reserve percentage, and how fast does it release after the debtor pays.

The short answers

What is a reserve in freight factoring?

A reserve is a percentage of each invoice the factor holds back instead of advancing. When the broker pays the invoice in full, the factor releases your reserve minus their fee. It protects the factor against short-pays.

Is a high factoring reserve bad?

A higher reserve means less cash in hand now and more of your money tied up waiting on broker payment. The reserve percentage and how fast it's released both affect your real working capital, not just the headline advance rate.

What to hold onto

• A reserve is your money held back until the broker pays.
• Reserve percentage and release speed both affect your real cash position.
• Slow release ties up working capital you need for fuel.
• Ask the reserve percent and the release timing, not just the advance rate.