The factoring business isn’t always well understood and even gets a bad rap in some instances. But why is this? The act of factoring a load helps a carrier in so many different ways, you’d think that everyone would be excited about factoring companies. Today we’re going to be debunking some of the most common myths about factoring services. First, let’s visit exactly what factoring is.
What is Factoring?
Invoice factoring is something that a factoring company offers primarily to carriers within the transportation industry. Often times, a carrier must wait 30-45+ days, on average, to get paid from their broker. Waiting this long to get paid can put small owner-operators in a cash flow pinch. This is where factoring can help – by factoring an invoice with, you’re agreeing to get paid soon (usually within 1-2 business days) and with a small fee paid to the factoring company. Not only that, but for carriers averse to paperwork, factoring can take the back-office business task of managing invoice payments off carriers’ plates, so they can focus on hauling loads and making money. Carriers can spend their time at home enjoying hobbies, friends, and family instead of juggling paperwork and trying to get paid.
The Top Myths About Factoring In The Transportation Industry
You might be hesitant to use a factoring company for a variety of reasons, as it’s a widely misunderstood concept that often gets a bad rap. Often what we hear are generalizations that have been made about the industry over the years. Like all things in life, factoring companies have grown and changed, each at their own pace. These changes have challenged the current status-quo. Let’s take a look at some of the myths that surround factoring and tackle them head-on.
Factoring Myth #1 – Factoring companies are all alike.
False. While factoring is a broad concept, every factoring agency is different. It’s up to the factoring company to set their own fees, determine the terms of their contracts, and come up with load requirements. Their customer support can even be vastly different. What sets Truckstop Factoring apart from other factoring companies is that we offer non-recourse factoring at a low-competitive rate. Although you may have worked with factoring companies in the past that all operate with similar terms, you may find some that operate completely different.
Factoring Myth #2 – You have to factor every load.
False. As we mentioned previously, every factoring company is different and although some factoring companies may require you to factor all of your loads, here at Truckstop Factoring, that’s not a requirement. Our factoring customers are allowed to factor the loads they want, when they want. As long as the broker they’re wanting to factor with is considered “factorable” you have the ‘okay’ from us to say yes or no to factoring.
Broker Factorability: The status on if you can factor a load with a specific broker. A broker is deemed “factorable” if they operate with a reasonably strong balance sheet and are financially sound.
Factoring Myth #3 – Factoring locks you in to a lengthy contract.
False. As the factoring industry has evolved over the years, so have their contracts. Similar to how each factoring company has different requirements on which loads you need to factor, they also have different contract agreements. Some companies require you to stay in their contract for well over a year and if you choose to break the contract early, you’re required to pay fees in upwards of $1,000+.
At Truckstop Factoring, we’re here to make your job easier, not harder. We know the importance of flexibility, and that nothing in the freight industry is predictable. That’s why you’re allowed to cancel your contract with a 30-day notice and a small flexible fee.
Now that we’ve debunked the top myths that surround the factoring industry, what’s next? We recommend you dig into understanding your current factoring company and do your research when you’re looking for a new one.
Finding The Right Factoring Company
In light of today’s economic uncertainty and market unpredictability, factoring can be a lifeline for carriers, both in terms of saving time and not taking any chances with cash flow disruptions. With each factoring company being vastly different, we recommend you shop around to find the right one for you. Pay extra close attention to factoring contracts as fees and requirements can often be hidden there without you knowing. Also make sure you understand the different services they offer, choose a factoring agency that knows the trucking industry inside and out. And finally, if you ever decide you’d like to learn more about Truckstop Factoring, our sales team is here to help.
Factor in peace of mind, starting today.