Factoring is the use of a financial institution set up and available to distribute funds based on each completed job you choose to give them.
The process is quite simple:
You run a load, now you have signed bills that must be sent back to a shipper or broker that may take up to 45-60 days to pay you.
Instead you choose to send:
- Your bills
- An invoice that says the shipper or broker is responsible for paying your company,
- And an original copy of the rate confirmation for the job to your “Factoring Company”
- issue you usually about 80-95% of the total amount of your bills,
- will mail your bills, invoice and rate confirmation back to the shipper or broker,
- and will collect the check, cash it, take about 5% for their services e.g. of 1000.00 BOL they’re paid about 50.00 bucks,
- and they send about 15% back to you in the form of a rebate check
If the shipper or broker is slow in paying they will call and do some of the coordinating to get the funds delivered as prompt as possible.
Saving My Time
Here’s a rule that all truckers need to keep ever before them: the more you allow others to assume responsibilities for you that you should be assuming for yourself the more you’re going to lose and be taken advantage of, period.
That being said you still have to know the difference between conservation of time and resources.
Those that can not make that distinction are destined for some problems ahead, let me illustrate. Once I run a load for a broker they have 30-60 days to pay me, I know how to wait 30-60 days for my money, wondering if whether or not its going to get there, I know when I have to bother a friend or someone to take checks to the bank for me, you see, I know how to do that, but I chose not to, so I find a legitimate factoring service that can fill my real need. They will pay me like the next day and put it on a fuel card for me and chase down the money for me when it’s slow coming in, all for a nominal fee.
That’s conservation of my time, and it’s worth it to me.
Here’s part of a testimonial I sent my factoring company recently, I think it’ll fit just right in this spot. First of all, the reality of waiting 30 to 45 days sometime 60 days to get paid is almost too overwhelming for anybody, but even these brokers that offer a quick pay involves a separate contract with each brokerage all with different ways of doing business, different standards and fee structures, I’d just as soon become familiar with and lock in to one system.
What’s more, if I had to do the follow up on all these companies, I’d be a raving maniac and I’d probably drive some of them over the edge too; and besides all that, I’d never have time to run loads, but factoring relieves me of that whole stress, so I can focus on running the company.
You can find freight factoring companies with the help of Funding Wizards page dedicated to trucking loans.
The Factoring Service I used was Eagle Capital Corp out of Tupelo Mississippi. They’re the greatest and I think you’ll like em’ too.
Let’s get to the real nitty-gritty though, I’m sorry, but if I’m a broker and things are tight, I mean really tight, I’d rather get the loads that were factored paid before I pay on the loads that aren’t factored.
Why? Because there are companies like Twelve Oxen Transportation, that call their factoring company on every single broker they can, and if that broker has not paid that factoring company Twelve Oxen WILL drop off the load, and who knows it might be a great potential money maker for the broker.
You see, it’s just basic common sense it’s not at all complicated. If you’re the lone ranger out there, waiting on some broker who a month later, can’t even remember you did a load for him, you’re asking for frustration times ten.
Factoring Traps to Avoid
If you factor through a reputable honest factoring company that is keeping all the cards on the table you should have no problem
Many factoring companies have resorted to blind siding the their customers. They get them in by paying them more up front but then they hit their customers with high transaction fees and volume fees, and so on, so in the end you end up losing more than if you would have settled for a company that might be paying out a little less on the front end but doesn’t have all the hidden cost.