Freight factoring can be good and bad for your business. When you start your own authority your phone will be ringing off the hook with factoring services. You’ve also probably heard about factoring services prior to starting your own authority.
Tell Me About Factoring
Factoring is equal to payday loans. Typically in the transportation industry it’s a 30 day standard to receive payment on the loads you have delivered. Some brokers and direct customer may pay the same day, or can take up to 90 days if not months! By factoring loads, you submit your proof of delivery (BOL – Bill Of Laden) and the confirmation agreement between you and the broker. Once submitted the factoring company pays out the % of the money you agreed upon. This can range anywhere from 15% to 1% of the load gross.
Debating If I Should Use Freight Factoring?
Smart business decision would tell you not to give up any percentage of your loads, however not many people come into this industry with cash laying around. If you need cash flow to keep your business operating you should use factoring. Factoring companies typically have credit check for brokers and customers to give you some sort of a in sight if you should haul a load or not with that customer. If you aren’t looking to use factoring you have other options as well. Other options include getting a business loan from a bank at low interest rate, or using a broker quick pay option when cash flow is needed for fuel, emergency situations, etc.
Not Sure Which Freight Factoring Company To Use?
If you do decide to factor your loads, I can not tell you which factoring companies are the greatest because they all of course want to make as much money as possible. However, depending your business plan you can decide if you want recourse or non recourse factoring. You also want to look at what’s being offered by the factoring company, such as fuel cards with discounts, terms and conditions on when you want to stop factoring. Fees for termination, and process fees. It’s very important to read through every agreement before signing it. Make sure you don’t even just send a application form before reading it thoroughly or having a lawyer go through it.
Looking For Good Freight Factoring Company?
A good factory company does not have hidden fees. You should be able to factor the loads you choose to factor. Some factoring companies force you to factor EVERY load. Also, you want factoring company that will allow you to terminate the contract without crazy fees, and at any time you want with at least a 30 day notice. Do not get locked into yearly contracts.
Factoring companies can be great for starting out for someone that is in need for a cash flow. Certainly most business owners will tell you how bad factoring companies are, but everyone has a different business mind and majority of small business use some kind of funding for cash flow. At anytime you read the agreement contract with a factoring company, don’t feel pressured to sign it without having them change certain terms that you wish to be put in place.