Transportation Minute: Freight Markets Improve While Due Diligence Evolves for Transportation Factors
Written By: David Jencks, Esq., Jencks Law, P.C.
After three years of difficult operating conditions, the trucking market is beginning to show signs of renewed strength. Following a sharp contraction in freight rates during 2023 and 2024, a combination of improving freight demand and reduced industry capacity appears to be shifting the market back toward balance.
Industry reporting indicates that truckload spot rates and rejection rates have begun to rise as freight demand strengthens and regulatory efforts force excess capacity out of the market. Tightening capacity and improving demand have pushed spot market rates higher and increased carrier negotiating leverage with shippers.
Several indicators point toward a gradually improving freight environment:
Spot market rates have reached multi-year highs in several recent reporting periods as capacity tightens.
Load-to-truck ratios have improved as fewer carriers remain in the market following the freight downturn and increased scrutiny on English language proficiency and safety records.
Industry analysts expect capacity discipline and regulatory changes to support stronger freight pricing through 2026.
For many motor carriers, these developments represent a welcome shift after a prolonged freight recession that pressured margins and forced many smaller fleets out of the market.
For transportation factors, strengthening freight markets typically translates to healthier portfolios and improved carrier liquidity. However, even as freight fundamentals improve, other forces—particularly geopolitical developments affecting fuel markets—continue to introduce volatility into the industry.
Geopolitics and Fuel Price Volatility
The trucking industry remains highly sensitive to fluctuations in energy markets, and recent geopolitical tensions involving Iran illustrate how quickly external events can affect transportation economics.
The Middle East remains one of the most critical regions for global oil supply. Disruptions affecting the Strait of Hormuz—a narrow maritime passage through which roughly one-fifth of the world’s oil supply moves—have historically had immediate effects on global energy prices.
Recent geopolitical tensions have already produced measurable effects on fuel markets, with diesel prices in the United States rising sharply in response to uncertainty in global oil supply.
For trucking companies, fuel volatility is more than a macroeconomic issue—it is a direct operational concern.
Several factors amplify this sensitivity:
Diesel fuel represents one of the largest operating expenses for motor carriers, frequently accounting for 20–30% of operating costs.
Fuel surcharges, while common, often lag behind real-time fuel price increases, temporarily compressing margins.
Smaller and mid-sized fleets often lack the balance sheet strength to absorb rapid cost increases.
When freight rates are strong, carriers can generally absorb short-term increases in operating costs. But when rising fuel prices occur simultaneously with weak freight markets, carrier profitability can deteriorate rapidly.
A Structural Shift: Larger Carriers Turning to Factoring
Another intriguing development shaping the transportation finance landscape is the increasing use of factoring by larger motor carriers and regional fleets.
Several structural trends are contributing to the growing adoption of factoring among larger fleets:
Freight markets have become more cyclical and volatile, increasing the value of flexible working capital.
Freight payment cycles are increasing in light of the recent payments decisions of C.H. Robinson, even for well-established carriers. This is only likely to increase.
Fleet growth requires significant upfront capital for equipment, drivers, and insurance.
Traditional bank credit for transportation companies can (and apparently is) tighten following freight downturns.
Carrier financial statements after a three-year recession are not attractive to traditional lenders.
As a result, factoring is increasingly being used not only as a tool for smaller carriers, but also as a working capital management strategy for larger and more sophisticated fleets.
For transportation factors, this trend presents meaningful opportunity—but it also introduces new underwriting considerations.
Larger Carriers Require Different Due Diligence
Factoring a small carrier operating a handful of trucks presents a very different risk profile than financing a regional fleet operating hundreds of trucks across multiple states.
As carrier size increases, organizational complexity often grows as well. Larger transportation clients frequently involve:
Multiple affiliated operating entities or holding companies
Combined brokerage and carrier operations within the same corporate structure
Enterprise transportation management systems and electronic billing platforms
Master transportation agreements with major shippers
Intercompany billing relationships among related entities
Understanding and management of leasing relationships
These operational structures require a more comprehensive approach to underwriting.
Traditional factoring due diligence—such as invoice verification and authority checks—remains important. However, when underwriting larger fleets, transportation factors increasingly incorporate additional analysis, including:
Customer concentration analysis
Review of shipper contracts for setoff rights
Field exams assessing the general status of leasing relationships and accrued liabilities to lessors
Accounts receivable testing
Operational diligence reviewing dispatch and billing systems
In many respects, underwriting larger transportation clients begins to resemble asset-based lending due diligence rather than traditional small-carrier factoring.
Stress Testing Larger Carriers
As factoring relationships expand to include larger fleets, many transportation factors are also incorporating basic stress testing models into their underwriting process.
These models need not be complex. In fact, several straightforward operating metrics can provide valuable insight into a carrier’s resilience during freight market fluctuations.
One of the most useful indicators is revenue per truck per week, which provides a quick snapshot of whether a carrier’s operations generate sufficient revenue to support its operating cost structure.
Industry benchmarks vary by equipment type and operating region, but dry-van carriers frequently require revenue in the range of:
$4,800 – $6,500 per truck per week
When revenue falls below these levels for extended periods, the economics of trucking can deteriorate quickly because many costs remain relatively fixed. Equipment payments, insurance premiums, driver wages, and regulatory compliance expenses typically do not decline at the same pace as freight rates.
Stress testing therefore often examines how a carrier would perform under several common industry scenarios.
These may include:
Freight rate compression
Trucking markets are cyclical, and freight rates can decline rapidly during downturns.
A 10–15% drop in freight rates can eliminate profitability for carriers operating on thin margins.
Fuel price increases
Diesel prices can fluctuate rapidly in response to global energy markets.
Significant increases can quickly compress carrier margins.
Fleet utilization declines
Trucks rarely operate at full utilization during freight downturns.
A 10–20% decline in utilization can materially reduce revenue while leaving many costs unchanged and leave carriers unable to make up for claims or over-advances.
Customer concentration exposure
Larger fleets may rely heavily on a limited number of large shippers.
The loss of a major shipper relationship can significantly affect revenue stability.
Insurance cost increases
Insurance costs in the trucking industry have increased significantly in recent years due to litigation trends and accident severity.
Significant premium increases can materially affect operating margins and viability.
These stress scenarios are not designed to predict failure. Instead, they provide insight into how resilient a carrier may be when market conditions inevitably shift and the ability of the carrier to resolve claims and over-advance positions.
For factors financing larger fleets, the underwriting question often becomes simple:
If freight rates decline, fuel prices rise, or a major customer relationship is lost, can the carrier continue operating without severe liquidity pressure?
In many cases, the answer to that question may be just as important as the credit quality of the underlying receivables.
The Good News: Freight Rates Have Moved Off the Bottom
After declining through much of 2023–2024, truckload spot rates began improving early in 2026 as capacity tightened.
National van spot rates reached roughly $2.43 per mile in February 2026, compared with $2.03 per mile one year earlier, reflecting a significant year-over-year improvement. [1]
Freight market analysis also shows spot rates approaching about $2.80 per mile inclusive of fuel in several recent reporting periods. [2]
ACT Research reports that spot truckload rates were more than 20% higher year-over-year in early February, reflecting tightening supply conditions. [3]
The overall takeaway from early 2026 data is that rates appear to have decisively moved off the cycle lows recorded during the freight recession.
Looking Ahead
The trucking industry appears to be entering the early stages of a new freight cycle. Tightening capacity and improving rates are beginning to restore optimism across the industry after several challenging years.
At the same time, geopolitical developments—particularly those affecting global energy markets—continue to remind transportation companies and their financing partners that industry conditions can change quickly.
For transportation factors, the opportunity to finance larger and more sophisticated motor carriers is expanding. But as clients grow larger and operational structures become more complex, underwriting practices must evolve accordingly.
Those factors with a deeper understanding of trucking economics, operational dynamics, and stress testing will be best positioned to navigate the next phase of the freight market.
About David Jencks, Esq.
David Jencks is an attorney with more than 25 years of experience in transportation and transportation finance. He represents factors and transportation companies in both transactional matters and litigation. David is a member of the Transportation Lawyers Association and serves as co–general counsel to the International Factoring Association. For nearly two decades, he has been a featured keynote speaker at the IFA’s Annual Conference and its Transportation Factoring Meeting. He has also led numerous trainings and webinars on all facets of transportation factoring, including account management, credit, technology issues, fraud prevention, risk management, problem-load resolution, billing practices, and legal compliance. David can be reached at davidjencks@jenckslaw.com.
The views expressed in the Commercial Factor website are those of the authors and do not necessarily represent the views of, and should not be attributed to, the International Factoring Association.