Trucking factoring companies are an important part of the transportation industry, and transportation factoring companies are a way of keeping cash flow moving in America’s freight system. What is a factoring service for trucking, and what should you look for in the best trucking factoring service?
What Are Freight Factoring Services?
Factoring is a way for freight carriers to be paid more quickly for loads that they deliver. Trucking factoring companies will buy invoices for freight at a discount, which then allows the carrier to enjoy an instant cash flow. This can be a great value for carriers who are attempting to grow their business or have immediate expenses that have to be paid. Without freight bill factoring, many carriers would have to wait weeks and sometimes even months for payment to come through from certain customers.
What to Look for In Trucking Factoring companies
- Personal Communication No one wants to be nothing more than a number, and good trucking factoring companies assign personal managers to each account so that everything runs smoothly. There should be a real human to talk to if you have questions or issues to be resolved. Since you’re paying for the service, you should expect customer service to go with it.
- Service options You should be presented with the option of choosing between non-recourse and recourse factoring options. In recourse options, the carrier will remain liable for any unpaid invoices. In non-recourse, trucking factoring companies make themselves liable for any unpaid invoices. There are pros and cons to each choice, and naturally you’ll be paid more for a recourse invoice than a non-recourse invoice. But you should have a choice and also someone willing to discuss the choices and how they work so that you fully understand what you’re getting into.
- Speedy service The point of using trucking factoring companies is to keep positive cash flow moving through your company. This means that the best companies will be able to give you your cash quickly, usually within 24 hours. They should also be set up and ready to give you approval quickly as long as you are servicing creditworthy customers.
- Favorable volume requirements Some trucking factoring companies will have minimum volume requirements. Others may have a requirement that states that if you use their services at all, you must factor all of your clients. If some of your clients pay immediately, there’s no need to use factoring for those accounts. Look for trucking factoring companies with no minimum volume to allow you flexibility in which accounts you factor.
- Favorable contract terms Ideally, you want to go with trucking factoring companies that have flexible terms. The contract should allow you to re-evaluate every month and end services when it makes the most business sense for you.
- Other extras Various trucking factoring companies will offer different types of services, so it’s a good idea to consider which ones might be helpful to you as you make a decision about which company to choose. Some of the services that are frequently offered include professional collections, insurance assistance, fuel card programs, and even complementary access to load boards.
What Kind of Rates Do Factoring Services Charge?
The rates will always depend on volume, so the higher volume you factor the lower the fees tend to be. The fees can also change depending on how long customers take to pay, although there are plenty of trucking factoring companies who have no reserve on their fee structure. But in general, recourse factoring will be between 2% and 3% for five or fewer trucks and 1% to 2% for six to 10 trucks. Non-recourse rates run between 3% and 5% and 1.5% to 2%, respectively.
If your company is in need of cash flow, trying to grow in a competitive market, or is dealing with an unexpected expense, trucking factoring can be a great way of getting a positive cash flow coming in immediately. Find the best company for your, get paid, and get back out on the road as quickly as possible.