Before signing a freight factoring agreement, be sure to understand the factoring details, processes for payment, collections, and possible hidden fees.
To understand what a factoring agreement is, you must first understand freight factoring. Freight factoring is the process of a trucking company agreeing to sell its invoices (accounts receivable) to a factoring company in exchange for cash. They do this because trucking companies often have to wait over 30 days after delivering a load before receiving payment from its client. You may also hear this process referred to as freight bill factoring or invoice factoring.
This lengthy wait can lead to complications with cash flow and prevent a trucking company from expanding its business or even covering operation costs such as fuel, repairs, and taxes.
Small fleets and owner operators who wish to factor will need to sign a factoring agreement. By doing this, they agree to the factoring agreement terms and conditions set by the factoring company. Not all freight factoring companies have the same agreement terms or even offer the same rate so it’s important to pay attention to for possible hidden costs.
Some rates might be higher but have less risk in terms of a client’s failure to pay. This is considered non-recourse factoring because the freight factoring company is liable for collecting from the trucking company’s client. Meanwhile, the trucking company is immediately paid in full (less a small percentage of the total invoice amount) and no longer has to deal with the shipping client or broker.
You might see a freight factoring company advertise a great rate of 2% to factor a load.
It might seem too good to be true right? Well, it is.
The factoring company that offers this extremely low rate did not initially disclose the hidden costs and fees to factor that they have buried in small font of a factoring agreement.
They may charge you fees such as:
On top of that, they may also charge commissions, and even require collateral. All of a sudden that low rate will cost you much more to factor than a slightly higher rate with no fees.
Trucker Path InstaPay is the most transparent freight factoring company you will find. It offers a competitive non-recourse rate so you won’t have to worry about collecting from a client.
Most of the other factoring companies will require you to agree to factor for one-year, making sure that you provide them with what they need.
But that’s NOT the case with InstaPay. Freight factoring with Instapay is the most flexible and easiest process to getting paid quickly for hauling freight.
Instapay has ABSOLUTELY NO FEES or commitment requirements. Factor as much as you want, whenever you want.
Trying to get paid doesn’t have to be complicated. We understand that running a trucking company means you’re always on the road, hauling freight, trying to stay on schedule and finish the job.
That’s why with InstaPay you can complete the entire factoring process right from your phone. Just send a picture of your rate confirmation and bill of lading to InstaPay and we will get you signed up and initiate a bank deposit to your account within a day!
There is no complicated contract or confusion when it comes to the factoring agreement. You can even view the factoring agreement to verify for yourself.