Thinking of Switching Factoring Companies For Your Fleet? It’s a Straightforward Process

Fast, reliable access to working capital is critical in the trucking industry, making invoice factoring a widely used financing solution for undercapitalized fleets or for those experiencing cash flow constraints. However, not all factoring providers deliver on their promise to provide reliable funding over the long term. When service delays, inflexible terms, or limited credit become an issue, it may be time to consider switching factoring companies.

This blog examines why trucking fleets switch factoring companies, why switching to freight factoring is a preferred option, and how the transition is facilitated through a factoring buyout.

Continuously evaluate your factoring company’s service

Planning ahead to prevent hitting a cash flow wall is one of the key strategies needed to ensure success of your trucking company. Not all fleets partner with the right factoring company to meet their evolving needs. It’s essential for fleet owners to continuously evaluate their provider’s service to ensure fast and reliable funding, as well as to protect their financial health. If services are found lacking, funds are delayed, or credit limits are limited, consider switching factoring companies.

Why switch factoring companies

Invoice factoring is a competitive industry. To win your business, unreliable providers may claim to offer streamlined access to working capital, then prove to be unable to uphold that commitment throughout the extent of the funding agreement. This is often the case for fleets that are attracted to the lowest cost providers, partner with under-resourced factoring companies, or commit to funders inexperienced in the trucking industry.

Here are the most common red flags that indicate an inadequate funding arrangement:

• Hidden fees such as Prime fee charges per invoice.
• Inability to meet funding deadlines of same day or even next day.
• Lack of credit availability for your customers.
• Poor communication or lack of customer service.
• Outdated reporting in online portals.
• Time consuming systems to upload or submit invoices for processing.
• Lack of understanding of industry shifts and challenges faced by fleets, along with support when needed.

If your factoring company can’t meet its obligations adequately or fails to keep pace with your fleet’s growth opportunities, switching factoring companies is essential for ongoing success.

A factoring company that specializes in the transportation industry can offer fair pricing, better terms, faster access to cash, and expertise that supports your long-term growth. These are the factoring companies that provide freight factoring, a specialized factoring arrangement tailored to meet the grueling demands of the trucking industry.

What is freight factoring?

This customized financing option offers faster funding, industry-specific support, and additional services, including fuel cards, various online tools to enhance efficiencies, and a robust account management portal to improve cash flow control.

Transitioning to a national leader in freight factoring can open the door to better terms and greater financial control. But how does the switch happen?

Switching factoring companies is a simple process

Although various factors compete for business, they often collaborate behind the scenes to maintain a healthy and resilient industry. Many reputable factoring companies adhere to an unspoken professional conduct code that facilitates seamless client transfers.

Specifically, members of organizations like the International Factoring Association (IFA) commit to a formal Code of Ethics, which includes a clause stating they will “assist one another in facilitating a move from one factor to another should a client desire to make a change.” That essentially forms an industry‑recognized practice, ensuring that client transitions are directed smoothly, confidentially, and without obstruction. The process is conducted via a process called a “factoring buyout”—and it’s more straightforward than most business leaders think.

What is a factoring buyout?

A factoring buyout occurs when one factoring company (the new one) agrees to pay off the outstanding balance owed to your current factoring provider in order to take over your financing relationship. In a factoring buyout, most of the work is handled between the two factoring firms, with minimal direct involvement from the client.

All that’s typically required from the client is to:

1. Authorize the change by giving notice to their current factor.
2. Sign a three-party agreement.

This process allows clients to conveniently exit their current factoring agreement without disrupting their cash flow or compromising the collections process.

How a factoring buyout works

Instead of your business repaying the original factoring company directly, the new factoring partner essentially “buys out” the existing receivables and takes over funding and servicing.

Let’s break down the buyout process so you can understand exactly what to expect when switching factoring companies.

1. Apply and get approved

Once you have identified a new factoring company to partner with, you must apply and get approved for funding. Your new factoring partner will perform due diligence, similar to any initial factoring setup, then provide a formal offer outlining the terms, funding advance rates, fees, and the proposed buyout process.

3. Notify your existing factor

Next, you’ll need to notify your current factoring provider of your intent to terminate the agreement. Your new factoring company will often help facilitate this communication to ensure a smooth and professional transition.

4. Coordinate the buyout payment

Your new factor will calculate the buyout payment owed to the current factoring company for all open receivables, fees, and any contractual charges. This payment is sent directly to the old factor, settling the balance to complete the buyout.

5. Redirect notifications and payments

As part of the switch, fleet customers are informed of updated payment instructions—such as revised notices of assignment and new lockbox or wire details—to ensure smooth payment processing and avoid disruptions.

Once the buyout is complete and customer payment redirection is in place, the process of switching factoring companies is complete. At this point, the new factoring company assumes ownership of the receivables and takes over the servicing and collections—often with better terms, faster funding, and improved service. It’s a straightforward and seamless process with most of the work done behind the scenes. No extra work is required from the fleet owner.

No funding gaps

In some cases, fleets are concerned that switching factoring companies will cause funding gaps during the transition. This concern may prevent busy fleets from switching factoring companies, trapping them in an unhealthy arrangement. Switching to a reputable factoring company experienced in transportation financing alleviates this concern.

A well-managed buyout is designed to keep your cash flowing throughout. National leading freight factoring companies have exemplary track records in coordinating seamless transitions, ensuring there are no funding gaps while switching factoring companies.

In addition, these experienced factoring companies ensure a smooth customer communication and transition process to maintain healthy customer relationships for your fleet. Furthermore, your new factor will assume the collection of existing unpaid invoices as part of the buyout.

Conclusion

Many fleets initially sign on with a factoring company that seemed like a good fit, only to discover issues once they’re into the contract. Other fleets experience service deficiencies associated with growth, as expanding fleet operations typically require additional financing.

If your current factoring relationship feels one-sided, slow, or outdated, you’re not stuck. Switching factoring companies through a buyout is a streamlined, low-risk, and often high-reward move for growing businesses.

With the right partner, you’ll establish a financing relationship that enables you to operate with confidence, unlock growth opportunities, and better serve your customers.

Contact us if you’re thinking of switching factoring companies—eCapital is a national leader in freight factoring. Reach out to our transportation experts today and request a no-obligation buyout consultation. It could be the first step toward a better, stronger financial future for your fleet.

Key Takeaways

• Not all factoring providers deliver on their promise to provide reliable funding over the long term. When service delays, inflexible terms, or limited credit become an issue, it may be time to consider switching factoring companies.
• Transitioning to a national leader in freight factoring can open the door to better terms, a more flexible structure, and greater financial control for busy trucking fleets.
• Changing to a new factor is conducted via a process called a “factoring buyout”—and it’s more straightforward than most fleet managers think.
• Switching factoring companies through a buyout is a streamlined, low-risk, and often high-reward move for busy and growing fleets.