When determining which factoring company you want to use do your due diligence and check everything out when making this important decision. This is your business we are talking about!

  1. READ the Contract.
  2. ASK questions before you sign any agreement.
  3. DO online research about the factor (not just Facebook).
  4. FIND a factor that is transparent and will work with you not against you.

Our staff is here strictly to help make your business grow and not to hinder your success. We want to earn your business every day!

We all get calls about extended warranties, student loan consolidation, lowering the percent of a credit card, etc. These are annoying calls, and usually do not apply to you or are too good to be true. I for one try to block them from my phone, but they keep on calling. When you start the process of becoming your own trucking company, you register yourself with the FMCSA, get a DOT/MC number, and wait for everything to be finalized. This innocent process usually signifies the beginning of other companies calling with solutions for all your trucking wants and needs. One of those niche services is called Accounts Receivable Financing also known in the transportation industry as “Factoring”.

When the time comes that you receive a call from a sales representative talking about alleviating your cash flow problems by giving you instant cash to pay your expenses (like fuel, truck and trailer payments, payroll, etc.) I would like to give you some inside advice on what to ask and look for when selecting your factoring company. Why? Because in an industry where you do not often meet face-to-face, and you must trust someone over the phone, carriers tend to believe what the sales representatives say (THAT’S A BIG NO NO!) versus what the contract reads. I want you to be the one asking the right questions so you can get the right factor that fits your needs.

Factoring is supposed to be plain and simple!

Ideally you would send in your invoice, the factor purchases it, and money would be sent your way. Good to go! What happens after a factoring company buys the invoice? Well, you hope they collect on it and you do not have to worry about anything. But are they really making an honest effort to collect on what they have bought? What if you find yourself with no collections notes on the invoices that you sent in? What if the company only does the financing and you must call to collect on your own invoices? Is that what you signed up for? They are supposed to be doing all the billing and the collecting right? Missing a page of the “bol” or “pod”? Are they not asking you to get that missing page or a better copy of it? Are they letting you figure out what is missing by looking at the aging reports? If the factor did the billing but not the collecting, procurement of missing paperwork, or communication regarding payment then why pay the fees? Unless you just want basic factoring and have the time to do all the other back end work yourself!

Factors have many ancillary fees they like to put into their contracts. It is a simple way for them to offer a lower financing fee and make more money with “other” fees. What are those fees you might ask? Most factors have an ACH fee, which is a fee to send you funds the next business day. There could also be

  • invoice creation fees
  • start-up fees
  • invoicing fees
  • minimum invoicing volume fees
  • early termination fees (which can add up to thousands of dollars)

and the list can go on and on based on how creative the sales representative needs to be to get their costs out of you! These fees mentioned can and should be negotiated out before the creation of any contract.

You will hear about two types of factoring:  traditional recourse factoring and non-recourse factoring (also known as “limited recourse” factoring). We have highlighted this topic in detail in a prior insight page written by our President, Ryan Noonan. Sales representatives are going to tell you that they offer non-recourse factoring and will buy and fund the invoice, so you have nothing to worry about. They will claim to take all the risk, leaving you with no risk at all. Stop! Ask the sales representative what the rules of your contract are and what invoices could be charged back to you. The rules on this vary from factor to factor and the risk is usually in favor of the factor and not you.

Remember that financing companies, banks, and factors are not in the business to lose money.

Now to be fair, all factors have very similar contractual rules. They are financing companies. Outside those normal contractual rules each factor is very different in how they work with their clients. Some factors are very large and have tons of services you can purchase. You may be just a number there and the customer service is a one-way street. Their focus is just funding invoices and not helping you with issues, flexibility, or giving sound advice when you need it.  After all, they have what you want – money!  There are also small to mid-size factors where customer service is a bit higher, yet you are still a number. These factors put more value into their clients, try their best to solve issues, and may have a little more flexibility than the big factors. These factors are still missing a valuable component.

Here at CarrierNet, we are a family-owned factoring company. You are not just another number. We truly care about each one of our clients! CarrierNet’s company values are simple – Customer Service, Financing, Education, and Solutions. Our WHY is easy. It is all about you, the client; we understand trucking, we understand what our clients’ needs are because we have been there, and we listen. CarrierNet has a dedicated collection team to call your customers and get payment details so you can understand why the payment is delayed. You have your own account manager who is there to answer credit questions, collection or industry questions and most of all factoring questions.

About the Author: Ryan Wilbeck
Ryan Wilbeck
Sales Manager at CarrierNet

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