Top 10 FAQs About Invoice Freight Factoring
- 1. What does factoring a load mean?
- 2. Why would a company want to use freight factoring?
- 3. How much does freight factoring cost?
- 4. Are there any other benefits to working with a freight factoring company?
- 5. What will my clients think if I use freight factoring?
- 6. Why should I check my customer’s credit before hauling a load?
- 7. What’s the difference between recourse and non-recourse factoring?
- 8. Why do I need non-recourse factoring if my customer is credit approved?
- 9. Do I need to sign a contract or is there a trial period?
- 10. Do I have to factor all of my invoices?
We factor a lot of freight invoices for transportation companies and truckers and therefore get a ton of good questions thrown our way. Here are the most common questions we hear regarding freight factoring:
1. What does factoring a load mean?
In simple terms, factoring a load is a financial transaction that allows owner operators, fleet owners and brokers to turn invoices from delivered loads into immediate cash. Invoice factoring unlocks money you’ve already earned and pays you within 24 hours, so you can put the funds to use right away. No more turning down loads or struggling to cover expenses. Transportation businesses turn to eCapital to simplify every step of getting paid, so you can focus on what is needed to run a better trucking business.
2. Why would a company want to use freight factoring?
Freight factoring is an immediate source of cash. Most transportation companies can’t afford to wait 30, 60 or 90 days to get paid. They need consistent cash flow to meet immediate financial demands. Freight factoring provides quick, affordable cash and eliminates the hassle of trying to collect from customers on your own. Many transportation companies use the fast access to their cash to grow their fleet or fund their next job. It can be more advantageous to use freight factoring than securing a bank’s business loan to invest in company growth.
3. How much does freight factoring cost?
Typically, freight factoring costs just a few cents on the dollar. Keep in mind, freight factoring is not a loan; you’re just getting access to your money faster for a small fee.
Here’s a basic criteria we use to calculate the rate:
- Total dollar volume you factor each month
- Average invoice amount
- How long it takes your customers to pay
- Diversity of your customer base
The factoring company pays the invoice and gives you the money, minus a small percentage. And, the more you factor, the lower the percentage will be. eCapital’s freight invoice factoring rates are competitive and many companies find factoring often pays for itself because they can put the cash to work for their business faster than if they wait to get paid.
4. Are there any other benefits to working with a freight factoring company?
Yes! Besides getting paid fast (often within 24 hours), there are tons of other benefits to working with eCapital. For one, we handle your accounts receivables so you don’t have to. We also have a portal and free mobile app where you can submit invoices for funding, credit check customers, track load status, view funding summary and so much more.
Using eCapital’s factoring services means that you’re eligible for these discounts and benefits:
- New Fuel Discount Program with credit terms.
- Exclusive Broker Network with high-paying loads.
- Discounts on basically everything you’ll need to succeed in the trucking industry.
5. What will my clients think if I use freight factoring?
Freight factoring (and factoring in general) has been around for quite a while; it’s more common than you think. Many of your customers are likely larger firms that have worked with factoring companies before. They understand that a factoring company knows the ins and outs of the accounts payables/receivables process and has years of experience in working with companies for collections. This intimate knowledge of the invoice process makes their jobs easier.
In addition, most seasoned factoring companies are positioned to deliver the highest levels of expertise and service – not only to you but also to your customers. This simply means that their job is to not only help you manage cash flow, but manage customer relationships on your behalf. This is certainly in the factoring company’s best interest, but also yours as well!
6. Why should I check my customer’s credit before hauling a load?
You work too hard to wait over 30 days to get paid for a delivered load, or worse, not get paid at all. Every time you take on a load, you are extending credit to that customer. To minimize the potential financial risk, it makes sense to perform an initial credit check on new customers and ongoing credit checks on existing customers. You can verify if the broker or shipper is credit worthy in just a few steps when you use eCapital Credit Checking in the portal and mobile app so you can accept the load with confidence.
7. What’s the difference between recourse and non-recourse factoring?
In simple terms, recourse factoring means you’re responsible for repayment and non-recourse is where eCapital is responsible for buying back invoices. So, if your customer goes bankrupt, you’re going to be stuck with the bill if you opt for a recourse factoring arrangement.
Non-recourse factoring does come at an extra cost. For a very small fee per invoice (less than 1%), eCapital will ensure your company is not held liable for unpaid invoices in the event your credit approved customer is unable to pay because of bankruptcy. eCapital offers both non-recourse and recourse programs tailored to meet your specific needs.
8. Why do I need non-recourse factoring if my customer is credit approved?
Just like never driving without your insurance, you shouldn’t factor without it either. Credit scores and credit worthiness can change by the week so it makes sense to protect yourself and your trucking company. Non-recourse factoring allows you to avoid unnecessary losses should your debtor become insolvent.
9. Do I need to sign a contract?
A one year term is good for both parties. The purpose of a contract is to establish stability, not intentionally lock one of the parties into a long and arduous relationship. Avoid at all costs any factoring agreement that locks your business into multi-year terms or has undefined termination penalties.
10. Do I have to factor all of my invoices?
In short, no. With eCapital, you have the freedom to factor on your own terms. You decide which customers you’d like to factor with, all or some. So, if you know one of your debtors usually takes more than 30 days to pay you, it makes sense to factor those invoices so you get paid in hours instead of weeks or months.
Freight factoring not only delivers faster access to your cash, but there are other benefits for transportation companies and truckers as well. We offer access to an exclusive Broker Network, robust Fuel Discount Program, discounts on tires, partnerships with insurance, truck leasing, tax preparation and tire pressure monitoring system companies, and so much more! Be sure to check out our freight factoring solutions page on our website for even more great benefits!
Since 2006, eCapital has been on a mission to change the way small to medium sized businesses access the funding they need to reach their goals. We know that to survive and thrive, businesses need financial flexibility to quickly respond to challenges and take advantage of opportunities, all in real time. Companies today need innovation guided by experience to unlock the potential of their assets to give better, faster access to the capital they require.
We’ve answered the call and have built a team of over 600 experts in asset evaluation, batch processing, customer support and fintech solutions. Together, we have created a funding model that features rapid approvals and processing, 24/7 access to funds and the freedom to use the money wherever and whenever it’s needed. This is the future of business funding, and it’s available today, at eCapital.