Freight Bill Factoring Educational Material

Cashflow can make or break the success of any trucking company. In rough economic times, however, getting paid quickly for every load you deliver takes on a greater importance. Most trucking companies, especially owner-operators, cannot afford to wait 45 to 60 days or more to get paid for their freight bills. It costs money every day to keep a truck on the road.

It is not uncommon for freight customers to give an advance on a load so truckers can pay for fuel and other trip expenses, but often that is not enough to keep cashflow in balance. Taking a cash advance is really nothing more than a short-term fix to overcome greater financial problems. So how do successful trucking companies break through their cashflow crisis? The answer is freight bill factoring.

Many trucking companies have realized the benefits of factoring their freight bills in order to establish a long-term positive cashflow solution for their business. Factoring freight bills is nothing more than selling them at a discount to a third party, known as a factoring company, in exchange for immediate payment. And in return, trucking companies can heal their cashflow pains almost overnight, enabling them to put more money back into their business, maintain their operation and fuel growth.

"I love factoring," said Jack Mathieu, owner of Miss America Madu, a small trucking company based in Long Island, New York. "I have 10 trucks and had a hard time dealing with the trucking business until I started factoring. Everything got easier right away because my cashflow improved. I now get paid immediately for every freight bill, so it’s easier to pay for fuel, pay drivers, take care of any breakdowns and much more. It has really helped me grow my business."

The factoring business is nothing new, and there are dozens of well-known factoring companies that specialize exclusively in the trucking industry. But not all freight bill factoring companies are the same. Choosing the right factoring company for your business takes research, and here are a few important things to know before you start gathering information.

FactorLoads is not a traditional factoring company. But traditional factoring companies will want you to sign an exclusive contract, which usually lasts for one year and renews automatically, unless you give proper notice of cancellation. You will have to provide detailed information about yourself and your business, including personal financials, company financials, customer lists and more in order to be approved. With most traditional factoring companies, not all trucking companies that apply are approved for factoring due to credit reasons.

Unfortunately, most factoring companies are usually not able to work with smaller trucking companies or owner-operators, which often have the greatest need for a factoring relationship. Unlike the FactorLoads program, traditional factoring companies have minimum requirements for the amount of business you do, which is usually at least $15,000 to $20,000 per month. And there can be a lot of paperwork to complete before you are accepted as a customer, which does not always happen.

Many trucking companies can be turned away at the door by factoring companies, particularly if they have had financial problems in the past or are unable to meet the minimum monthly funding requirements. Shopping for the right factoring company to meet your needs is not always easy. There can be hidden fees, so be thorough in your research. For instance, you may be charged as much as $750 for a one-time start-up fee.

Unlike the FactorLoads program, traditional freight bill factoring companies do not always provide funding the same day they receive your freight bills. If they do, you may have to pay more for that privilege. Generally, you have to factor every freight bill, and the factoring company will advance between 80 to 90 percent of the money. The balance is withheld in a reserve account, which you cannot access.

As the factoring company receives payment for your freight bills, a percentage of the money withheld is released back to you. Unlike the FactorLoads non-recourse program, if a factoring company does not get paid for a freight bill, or it takes longer than 45 to 60 days, they will charge back the full amount and take it from your reserve account, whether you like it or not. That is known as recourse. And for that reason, it remains important for you to make smart business decisions before accepting a load from any customer with a less-than-average history of paying freight bills in a timely manner.

Unlike the FactorLoads program, the negotiated contractual fees or percentage you are charged by factoring companies is commonly based on several things.. Factoring companies will establish your base rate, which may commonly vary from 3 percent to 7 percent. However, that percentage can increase on a sliding scale with each freight bill, depending on how long it takes the factoring company to get paid. With some factoring companies, the actual cost to you may exceed 10 percent or more for any given freight bill. In the end, your actual factoring costs can be higher than the agreed upon base factoring rate - or you could be charged back the full amount of the freight bill and still have to pay their factoring fees on top of that!

Every contractual relationship has a beginning and an end, so before you enter into such a relationship, it’s important to know the terms. What many traditional factoring companies do not like to discuss is how you can end the relationship. If you break your contract, you will be subject to all the fees for the life of the agreement. And if you give proper notice to terminate the contract, which is usually 60 days before the automatic renewal date, you are put in an awkward situation. If you continue factoring during that time, it becomes difficult to end the relationship, because the factoring company will not legally release you until all open freight bills have been paid. That’s the catch, but don’t be discouraged.

Most factoring relationships do not account for the special needs of owner-operators and small trucking companies. However, our factoring program does.

Our unique non-recourse freight bill factoring program is now imitated by other factoring companies, but not duplicated. Unlike traditional freight bill factoring companies, with FactorLoads there are no term contracts, no monthly minimums and no charge backs for freight bills that meet our funding standards. Truckers get same day funding for their freight bills and are charged a flat rate of 6.9 percent for each freight bill factored. Because we factor on a customer-by-customer basis, you can choose which customers you want to factor and bill the others on your own.

With our online Account Management Center, you can monitor each step of the factoring process at any time. View accurate, easy-to-understand custom reports that you control, have 24 hour access to credit information on thousands of the most popular freight customers and more!

Click here if your trucking company needs money to grow, you want more control over cashflow or have difficulty paying bills or making payroll.