There are so many freight factoring companies to choose from that it can be overwhelming. So, how do you decide who to work with? Choosing the right freight factoring company should not be taken lightly. After all, it involves time and money.
Whether you are an owner operator, fleet owner or a freight broker, there are many features to consider when narrowing down the search for factoring services for your business. Here’s what you should look for:
Longevity and growth
Why should the number of years a company has been in business matter? Newer companies will promise you the world to get your business. But they don’t usually have the capital or know-how to back it up. A new business might work when you’re just starting out as well but they might not be able to grow with you.
An established company will usually have a reputation for excellence over many years of service (how else could they stay in business?) and the business capital to back your invoice funding needs. A company with a long history can likely offer better rates and fast cash funding, usually in as little as 24 hours.
As your invoice factoring needs grow, so does your funding needs. Partnering with an established company will set you up for the long term.
Focus on the road
It’s very important to find out if the factor actually specializes in the transportation industry. Just having a little trucking industry experience is not enough. The company must be up to speed on the unique issues facing trucking businesses like yours.
A factoring company who specializes in transportation can tell the difference between a rate confirmation and bill of lading, knows the industry terminology and understands that you’re on the road practically 24/7 so you don’t have time to wait for funding because you need to get started on the next job. Look for a factoring company that focuses on freight factoring for trucking companies to get a low, competitive rate.
Perks that fuel you
Some factoring companies will offer you some sort of fuel card or even a fuel advance. Some of these companies load your funds on a card so you can use them directly at the pump. Good factoring companies partner with fuel card providers to offer discounts at the pumps.
Some discount cards can offer savings on the cash price of fuel at service stations throughout the country. This value-added service can save you thousands of dollars per truck per year. The more you drive, the more you save.
Extra, extra (features) read all about it
While fuel cards are a fairly standard perk, some freight factoring companies offer other extras like discounts on tires, ELD, tax prep, truck leasing and insurance; access to load boards; free credit checks, load management, online portal and mobile app; and a ton of other extras. Make sure to factor in the extras when you’re looking at the cost of freight bill factoring.
Credit where credit is due
Checking the credit worthiness of a potential client isn’t just a good idea; it’s the difference between getting paid and getting burnt.
Some factors provide an online portal where you can quickly and easily run credit checks on potential customers. This way you can check the credit worthiness of any customer before you accept the job so you can ensure the company will pay for services. And you’ll never haul for deadbeats.
Align yourself with a real partner
Ask the factor if they provide a dedicated account team for your business. You need to work with people who are familiar with you and your business needs each time you contact the company. Don’t settle for anything less.
You don’t want to have to school a stranger on your unique account management needs every time you call. The best factoring companies provide their clients with a dedicated account team for personalized service whenever it’s needed. You should also have online access to your account anytime, day or night.
No hidden fees
Unfortunately, some – not all – factoring companies have hidden fees that you may not find out about until after you sign an agreement.
Avoid hidden fees by reading the fine print on any agreement you’re asked to sign. Be aware of some of these common fees:
- Administration or Maintenance Fees: charged to keep an account current or for providing reports.
- Invoice Processing Fees: charged for processing invoices.
- Monthly Minimum Fees: charged for processing fewer than agreed upon invoices during the month.
- Early Termination Fees: charged when you’ve signed an agreement covering a set time period, then opted out early.
The customer is always right
Before signing on to work with a factoring company, have them walk you through their process for handling invoices, billing and collections. That can reveal how the factor will treat you and your clients.
It is in the factoring company’s best interest to treat their customers with courtesy and professionalism. Choose a factor that makes customer service a priority and you’ll find it easy to check and manage your account.
Is recourse worth the risk?
The basic difference between recourse and non-recourse factoring lies in whether you want to accept or avoid the credit risk of your customers not paying an invoice.
With recourse factoring you accept the risk of your customers not paying. The factor has recourse to collect an invoice value from you with this type of factoring. Because you are accepting the risk you get a lower factoring rate.
With non-recourse factoring the factor accepts the risk of your customers not paying due to insolvency or bankruptcy. The factor has no recourse to collect the invoice from you. For that you pay a higher factoring rate.
Factor some, all or none
Some factoring companies will require you to factor all of your invoices with them. Others will require you to factor a minimum number of invoices monthly. Good factoring companies are flexible and let you decide which and how many unpaid invoices you want to factor.
The key to finding a great factoring company to work with is to be unafraid to ask pointed questions. Good factoring companies will welcome this and they’ll answer promptly and honestly.
The not so good companies will try to bluff their way through your questions, without giving you a straight answer. Don’t waste your time with someone who tries that with you.
Use the information above to see what a good factoring company looks like. This should help you in the search to find the right partner for your trucking business so you don’t get burnt.