What Is a Factoring Fuel Advance and How Does It Work?

Last Updated December 2, 2024

Truck drivers spend an average of $2,400 a week just on gas, making it one of the biggest expenses for owner-operators. That might not be an issue if you run an established trucking company, but if you’re just getting started, it can be challenging to get enough funding to cover fuel costs. To complicate matters, delayed client payments and increasing fuel costs make it even harder to cover this essential expense.

It’s no wonder why more owner-operators are turning to fuel advances. These quick cash advances cover expenses like fuel, allowing your business to keep moving without disruption. Whether you’re an owner-operator or managing a fleet, understanding how to leverage fuel advances can make a big difference in your business’s profitability.

Check out this guide to learn about fuel advance trucking solutions, including the associated costs and where to find them.

What Is a Fuel Advance?

Truck drivers use fuel advances to get an advance payment on invoices, helping cover fuel expenses in the meantime. If a client hasn’t paid you yet and you need those funds right now, a fuel advance can keep you moving without delays.

While you could always pay out-of-pocket for fuel expenses, that adds up fast—especially if you’re driving an average of 400 to 600 miles a day. Instead of paying for gas with your personal money, fuel advances allow your business to get the working capital it needs. You usually request an advance shortly after picking up a load, allowing you to get the necessary cash for fuel before the long trip.

How Do Fuel Advances Work?

Unlike credit cards, fuel advances are relatively quick and straightforward. Here’s how they work:

• Find a provider: You can get fuel advances from freight factoring companies or fuel card providers. If you aren’t sure where to get a fuel advance, we’ll cover this later in the guide.
• Confirm the load: When you receive a load assignment from your client, notify your factoring fuel advance provider. You can usually request the fuel advance right after picking up the load.
• Receive disbursement: The fuel advance provider will verify the load and give you a percentage of the payment upfront. Most advances cover around 50% of the expected payment, but it depends on your provider. At any rate, this is usually more than enough to cover gas and other expenses for the trip.
• Settlement: When you complete the delivery, you send the remaining load payment to the fuel advance company. They deduct their fees before paying you the remaining balance.

As you can see, fuel advances aren’t “free.” Still, many owner-operators think the fees are worth it because advances improve cash flow. Plus, there’s no need to use your personal funds to pay for gas, which simplifies accounting.

Benefits of a Fuel Advance

Fuel advances aren’t right for every situation, but they’re helpful in a pinch. You only request an advance as needed, so you can choose when you want an advance or not. From improved cash flow to convenience, there’s a lot to love about fuel advances.

Better Cash Flow

Fuel advance factoring means you get a portion of the load payment in a day or two. No more waiting a month for payment; with this option, you can refuel and continue your route without interruption. You get immediate funds to cover fuel and don’t need to wait for customers to pay. This option reduces financial stress and lets you focus on what matters: driving.

Flexibility

The nice thing about fuel advances is that you choose when to request an advance. Feel free to fund your own fuel when finances are strong and request advances when things are leaner. Unlike a loan, which comes with interest and strict terms, factoring fuel advances are very short-term. They’re designed to help you unlock the profit that’s already in your business—minus a small fee—so you can get back on the road with fewer interruptions.

Protect Your Personal Finances

Without factoring fuel advances, you have a few options for covering expensive fuel costs. Most owner-operators opt to pay for fuel themselves in the meantime, but that could quickly put your personal finances at risk—especially if you recently started a new trucking company and funds are tight. Fuel advances allow the business to secure funding without dipping into your savings.

Simplify Accounting

There’s no need to worry about reimbursements or tracking credit card statements. A factoring fuel advance is surprisingly simple. The factoring company handles the payment collection and deducts fees automatically, helping you get paid faster without complex accounting maneuvers.

How Much Do Fuel Advances Cost?

Fuel advance companies charge a small fee in exchange for fronting your fuel costs. The actual cost of the advance depends on:

• Your provider
• The total load value
• Freight route
• Risk
• Percentage of the payment requested upfront

Generally, you can expect to pay one to five percent of the total load payment. However, you might also be on the hook for administrative or processing fees. Always read the fine print to understand how much the factoring fuel advance provider will deduct from your advance.

Unlike freight factoring, where you get the majority of the payment upfront through a factoring company, you get 40% to 50% of the total value with a fuel advance. So, if the shipper payment is $1,200, you would get around $600. The fuel advance fee would range from $12 (1%) to $60 (5%).

Regardless of whether you plan to request a fuel advance or not, your invoices need to account for fuel and other expenses. Always add fuel surcharges to your invoices to account for the surging price of diesel. A fuel surcharge calculator can help you stay profitable. Calculating cost per mile is also helpful to keep your business in the black when bidding for loads.

Where to Get a Fuel Advance

You don’t have to look far. You can get a fuel advance from:

• Factoring companies: The best place to get a fuel advance is from a factoring company like altLINE. We specialize in providing capital for trucking businesses and even help with invoicing and collections, allowing you to focus less on cash flow and keep your eyes on the road.
  Freight brokers: If you work with a freight broker, they sometimes offer fuel advances as part of their services.
  Fuel cards: These are a great tool for improving cash flow, but you can get upfront cash with some fuel card programs too.
  Banks: Banks specializing in trucking sometimes offer fuel advance programs. This option is hard to come by, but it’s worth noting if your bank already offers programs for truckers.

Always read the fine print regardless of where you get a fuel advance. There are many factoring fuel advance providers out there, so don’t be afraid to shop around and find the best option for your business.

What You Need to Receive a Fuel Advance

Fuel advances are much faster than requesting a loan or a credit card, but you still need to provide information to secure an advance.

1. Signed Bill of Lading

A bill of lading (BOL) is a document that truckers issue to shippers. This legal document is essentially an agreement between you and the shipper on what you’re shipping, how much, and where it’s going. It’s also treated as a receipt that you present upon delivery, proving that you delivered the cargo.

2. Signed Rate Confirmation Sheet

The fuel advance company will also need to see proof of rate confirmation. This document shows the price your customer agreed to pay for the shipment. Rate confirmation is a must-have for any fuel advance because it tells your provider how much to advance. Your client needs to sign it to prove that you both agree on the rate.

3. Client Contact Information

Not all providers require this, but some will ask for your client’s contact information to verify the load. If the fuel advance provider asks for this, give your clients a heads-up so they aren’t taken aback when the provider calls.

4. Proof of Pickup

Next, fuel advance providers will want to see evidence that you picked up the load. Some ask for photos, while others just need to see electronic evidence, like GPS tracking information. This step helps fuel advance companies verify that this is a legitimate request.

5. Fuel Advance Agreement

You need to sign a contract with the fuel advance company to receive an advance. This document details the repayment information, fees, and other important information. Don’t skip over the fine print; always read contracts in their entirety to ensure they’re legitimate and fair.

Fuel Advance FAQs

How long will it take to receive my fuel advance with altLINE?

It depends on the provider. altLINE customers often receive fuel advances within 24 hours of submitting a bill of lading and rate confirmation sheets. This is much faster than alternatives like loans or credit cards, ensuring your business stays on track.

Do I need good credit to qualify for a factoring fuel advance?

No, fuel advance factoring companies care more about the creditworthiness of your customers than your trucking company. Since no credit check is required on your end, fuel advance factoring is accessible to all businesses, even if you have poor credit or no credit history.

What type of trucking businesses benefit most from fuel advances?

Fuel advances can be a game changer for small and medium-sized trucking companies, as well as owner-operators. If you’re experiencing cash flow issues, fuel advances can keep you profitable without interruptions. You can also benefit from fuel advances if your clients ask for longer payment terms extending beyond delivery.

What other solutions are there to help pay for fuel or save money on fuel?

Fuel advances are a great way to pay for fuel if you’re currently short on cash. You can also reduce fuel costs by:

• Signing up for a fuel card
• Adding fuel surcharge fees to your invoices
• Optimizing routes with fleet management software