Partnering with a freight factoring company may be one of the best decisions you could make for the growth of your young trucking business. But it could just as easily turn into your most sour decision if you’re careful to choose the best factoring provider for your specific business.
Therefore, we dedicate the rest of this article to helping you make the right factoring decision for your business. We do this by giving you a list of 9 factors to consider when choosing a freight factoring company.
How flexible are the terms of the freight factoring company? Does the company offer competitive offers? Are there discounts for long-term customers?
Some factoring companies force you to factor invoices for all your customers as long as you’re in contract with them, trapping you with their business. Unless you’ve given it a thought and decided that that’s what’s best for your company, this is often a red flag. You want to be able to opt out of the contract when you want without feeling tied to any factoring company.
Other things that contribute to the flexibility of a factoring company are if they have a minimum and/or maximum amount of invoices you have to factor in each month.
It is important to know how free your business would be when you decide to bring a factoring company on board.
Although the trucking industry can be very dynamic, there really isn’t anything new happening. And only experienced companies can keep up with the dynamics and still be able to give you the best factoring services. Some of the most experienced factoring companies have been in business for at least 5 years.
Choosing experienced factoring companies may also save you a lot of stress, as the company would likely already have an optimized system in place to ease the factoring process for you.
Furthermore, expertise and experience also go hand in hand in this industry. So, signing up with an experienced factoring provider often translates to partnering with the experts.
3. Customer Service, Reviews, and Ratings
Customer service is everything. If the factoring company has everything else on this list but has poor customer services, you should still consider dropping them. With the right customer service, you can better interact with the company and get things done faster and more efficiently. Friendly customer service also makes it easier for you to manage your account.
One way to know if the freight factoring company has good customer service is if you can access your account online 24/7. This means the company should have an active website like the one HaulPay has. Some factoring companies also allow you to submit your documents online, which makes the entire factoring process easy.
What other customers have to say about the company is also another important thing to consider. You can look up their customer reviews and ratings on Google.
It is not just enough that you do business with any factoring company. You would be helping yourself much more by choosing a factoring company that specializes in the trucking industry. Or better still, one that specializes in your kind of product or service.
This is because the factoring provider would be up to date on details that affect your trucking company and be able to provide solutions that are tailored to your business. There would also be lesser opportunities for error, as the company would have experience dealing with your kind of business.
5. Recourse Vs Nonrecourse
Recourse and nonrecourse are clauses you’ll always find in factoring contracts. It is important that you read this part of the contract so that you know how best to proceed with the company.
Recourse factoring is a part of the contract that empowers the factoring company to take from you should your customer delay unnecessarily or the customer fails to pay. In other words, the company holds you responsible when your customer bails.
Non-recourse factoring is only slightly different because it does not charge you when your customer files for bankruptcy or goes out of business. While this is a very rare scenario, it still limits your risk to some extent
6. Contract Renewal Process
A factoring contract can last for up to a year. But unless you have it on your calendar somewhere, it is easy to forget when your contract expires. And you don’t want your contract expiring at crucial moments.
Fortunately, there are many factoring companies that send you reminders when your factoring contract is about to expire. Some even take the extra step of guiding you through the renewal process. These are the kinds of companies you want to be in business with.
Across the board, freight factoring companies charge anything from 1% to 5% of the invoice value. While most companies charge a flat fee, they put some factors into consideration before giving you a rate for your specific freight.
One way to get the best deal is to shop around. Ask the freight factoring companies what their rates are for your freight. Also, ask your factoring company if there are any hidden charges, such as invoice processing fees.
The bigger the freight factoring company, the more likely it is that the company is able to handle your growth. Because just as there are small trucking companies, there are small freight factoring companies. And if your business outgrows such a freight factoring company, you would have to get into the stressful market of scouting for new factoring companies all over again. This is why it is important that you do business with a freight factoring company that is large enough, or at least capable of scaling with your business.
9. Other Additional Services
Most factoring companies offer additional services for owner-operators. These additional services include:
- Free credit checks
- Fuel card programs
- Round-the-clock customer services, and many more.
- Referral Program
These additional services give you an inclusive experience with the freight factoring company.
Still Having Trouble Choosing The Best Freight Factoring Company?
The steps required in choosing a freight factoring provider can sometimes be overwhelming, and analysis paralysis sets in. But not to worry, we’ve taken an extra step to research a lot of factoring companies. And one that completely stood out for us is HaulPay.
HaulPay stands out for its ability to automate the entire freight factoring process, making it easy for you to sell your invoice at a moment’s notice and get paid within 24 hours. In addition to that, HaulPay allows you to check a customer’s credit for free before getting in business with them. What better way is there to tell the good customers apart from those that will run your business aground?
Many freight factoring companies hide behind hidden fees and interest costs, but not HaulPay. Instead, it offers competitive rates and a flexible enough contract that reminds you that you’re in business with it by choice and not by force.
Getting started with HaulPay is easy. You can see if Haulpay is a great fit for you HERE
When the rubber meets the road and you’re about to make your pick, make sure you have considered the pros and cons of your candidate factoring companies. Your survival and success of your business could depend on it.