Freight factoring can be advantageous to your trucking company but there are some factoring costs that are misleading and comparing factoring rates as well as their offer details can help you maximize earnings.
There is more to the factoring cost than the factoring rate offered in freight factoring. Freight factoring provides owner-operators an opportunity to better manage their cash flow and eliminate waiting to get paid. Factoring companies offer rates based on a variety of factors but there are several things you must understand when talking about the factoring cost.
Some require specific qualifications a client must meet to earn the best possible factoring rate. Others might require a specific volume of loads or long-term commitments (not quite ’til death do us part but nonetheless). Sometimes the lowest factoring rate won’t provide you with the lowest cost to factor.
When comparing factoring rates a 1.5 percent factoring rate can cost more than 3.5 percent rate. Yes, you read that correctly. It’s entirely possible that a lower factoring rate can actually cost you more. Let’s say Factoring Company A who is offering a 1.5% rate and Factoring Company B is offering 3.5%. You’re more inclined to factor invoices with Factoring Company A because the rate is better right?
While Factoring Company A’s rate is lower, the overall cost to factor is not. This is due to fine print in Factoring Company A’s contract where it included a variety of fees and commitments from you.
By breaking down the additional factoring fees and including them with the factoring rate we can compare the true factoring cost and decide which option is best for you. In this case, Company B would be the best freight factoring company for your trucking business.
Not all factoring rates are created equal. If you are interested in using a freight factoring company to help your cash flow, comparing factoring rates and determining the actual factoring cost can save you thousands. Some factoring companies aren’t transparent and hope you won’t see through some of their additional fees that lead to a higher factoring cost to you.
Remember to always read the fine print to avoid those hidden fees in your factoring contract and understand the details that could lead to additional fees before committing to factor with a company.
Factoring companies like Trucker Path InstaPay offers non-recourse factoring with no commitment or fees. IntsaPay is completely transparent and you can easily get paid in a day by factoring right from your phone. It’s perfect for owner-operators with a simple flat rate and no additional costs.