Last Updated on December 16, 2020
How to Pick the Best Freight Factoring Company – If you have a trucking business, you know that it is almost impossible to receive payment immediately after delivery. While on-time delivery is the key to getting your invoices paid, waiting for the payments to arrive can affect your cash flow.
As a business owner, you should always look for ways to improve your cash flow. And one of the ways is to choose the best freight factoring company for your business. These companies will buy your unpaid invoices and pay you a percentage of it before your client pays it.
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How to Pick the Best Freight Factoring Company for My Trucking Business
Choosing the best factoring company is not an easy task. There are hundreds of factoring companies in the market that vary in size and experience. While some would serve various industries, others will focus on a segment. As a business owner, how can I say this is the right company to offer me these services?
Here are some tips to help you find the best freight factoring company for your business today.
1. Industry Expertise
Once you know how invoice factoring works, it’s time to start searching for companies that can help you. Choosing a factoring company that has direct experience in your industry is a goal. In addition to industry experience, you should choose a factoring company that is well-established and has a proven track success record. Start by searching online for the best transport factoring companies to make your list.
2. Evaluate Customer Reviews
Reviews are an important tip to help you choose the best invoice factoring company. Before entering into a deal with a factoring company, it is important to know how most clients who have worked with them react. It is important to pay attention to customer reviews as this will help you evaluate the best freight factoring company that you should select and hire to provide you these factoring services.
3. Ask for Terms, Rates, and Fee Structure
You may be focusing on getting approved by any truck factoring company. However, you should take a closer look and request information from several companies. Ask them about their terms, rates, and fee structure. When it comes to terms and rates, you should prioritize questions regarding the types of factoring the company offers. You should also ask them about their rates, commitment requirements, and approval process.
Factoring companies that claim to be the fastest, cheapest, and easiest to use may not be the right fit for your business. These companies often unfairly charge you additional or hidden fees, such as application fees, background check fees, field examination fees, attorney fees, UCC filing fees, monthly processing fees, invoice submission fees, ACH fees, and wire transfer fees.
Factoring fees can range from 1-5% per month on the face value of the invoice. Some companies advertise very low fees of 1%; however, they make up with hidden fees. Factoring advance rates can range as well from 70-90%, but typically tend to be 80% for non-specialized industries. An advance rate is the percent of the invoice face value that you will receive right away. Just remember what might seem to be the cheapest or best option can turn out to be the more expensive or more restrictive option with additional fees or lower advance rates.
4. Integrity
You want to work with a factor that keeps its promises, treats your customers fairly, and doesn’t surprise you with hidden factoring fees. Use your resources; you can request your factor to provide you with bank references, client references, and a summary of their financial status. Your factoring company should have a strong credit history and a list of long-term clients. Remember, your factor will be your working partner, so demonstrated professionalism is essential.
It is necessary to carefully choose a factoring company. You need a factor that can offer you more than just financing. When choosing a factoring company, consider how important each of these critical factors is to your business. You need to choose a business partner who will provide your business with the best combination of criteria, flexibility and terms that suit your needs.