Why It Matters: Choosing the Right Factoring Company for Small Trucking Companies

Regardless of the state of the freight market, choosing the right freight factoring company is a critical decision for small trucking companies. Oftentimes for small carriers, the difference between profit and loss is seemingly small decisions like which freight factoring company is better.

Here, we’ll introduce important factors small trucking companies should look at while considering a freight factoring service and how they can use these factors to decide which company is right for them.

Factors Small Trucking Companies Should Consider While Shopping Factoring Companies

Fees

Factoring fees vary from one company to the next, not only in terms of the cost to their customers but how the fees are assessed. Some factoring companies charge a flat rate and others charge a percentage of the amount invoiced. The rates themselves vary, and additional fees charged by each factoring company will, as well.

When you’re shopping for a factoring company, you must look at not only the rates they charge and how they charge them but also any additional fees included to get a good picture of the real cost of factoring with the company. The best option may vary from one trucking company to the next based on your business model and needs.

Terms

The terms offered by factoring companies can have a huge impact on a trucking company’s cash flow and, ultimately, the bottom line. Who is responsible if a customer doesn’t pay an invoice (e.g., is it recourse or non-recourse factoring)? When and how will you be paid? 

It’s important to look carefully at how long it will take for you to receive payments and what conditions must be met before the factoring company will release them, the percentage of the invoice the factoring company will offer in advance (before the customer pays the invoice), and the types and number of invoices the factoring company will accept. Small trucking companies must consider how the terms would affect their operations on a day-to-day basis and their bottom line over time.

Available Services

Each factoring service offers its own array of services that go above and beyond cash advances on invoices. For example, on top of services like fuel cards and helpful technology to help you run your business better, Express Freight Finance has partnerships with insurance companies and other key vendors to offer customers access to discounts and additional services like access to load boards. To learn about all the services Express Freight Finance has to offer, reach out to our team at 877.697.0605.

Think about the types of services that your company would actually utilize and the types of services factoring companies offer that would help your business thrive. Consider factoring companies that can offer you the types of services that would help your business be successful.

Reputation

All factoring companies are not built the same, and one way you can tell the difference between one that will work for you and one that might work against you is their reputation. You want to understand their track record. How do customers feel about the service, how they resolve issues, their professionalism, their reliability?

Take time to dig into the reputation of potential factoring companies. You can do this by reading online reviews, checking out the testimonials offered by their current customers, and getting in touch with references the company offers or by seeking out reviews from your peers who have used the company in the past or currently.

Tips to Choose the Right Factoring Company

Shop Around

Don’t settle for the first factoring company you come across. Take time to shop rates and terms offered by various factoring companies. Check with at least three different companies and proceed to dig deeper into the best candidates.

Verify Licensing and Insurance

You can’t presume that a potential factoring company is properly licensed and insured. Obtain proof that they have the proper licensing and insurance so that you know your business is covered if anything happens.

Read the Contract Carefully Before Signing

Contracts can be complicated. It’s important that you know and understand what a contract really says before you sign on the dotted line. Look at the terms including clauses about terminating your contract, fees, and any other requirements or restrictions that may be included. Get in touch with the factoring company if there’s something you’re not positive you understand in the contract, and they’ll be happy to explain. You may want to have a legal representative look over the contract, as well.

In Conclusion

Choosing the right factoring company is oftentimes a key business decision for small trucking companies to help maintain cash flow and minimize clerical work. By carefully considering each company based on their fees, terms, services, and reputation, small trucking companies can choose the right factoring company to help them meet their business goals. Considering Express Freight Finance? Fill out the form under ‘Get Started’ or text us directly from our website.