Be certain to review the fine print of freight contracts as sneaky freight factoring companies sometimes have hidden costs that are added to the advertised factoring rate.
Factoring can be a great tool to streamline your cash flow and grow your business as it eliminates the wait to get paid for owner-operators. However, some factoring companies have contracts with complicated jargon and disclaimers hidden in the fine print.
Sometimes a factoring company will advertise a great rate, far lower than any competitor. It’s a perfect scenario for you, right? Well, not exactly.
Those rates that seem too good to be true are typically just that. Although a low rate is optimal, the associated fees that you will incur in addition to the rate can balloon the overall cost for you to factor.
ACH Transfer fees can be issued each time you factor and range from $10 to upwards of $25 depending on the type of transfer or deposit. This cost can surely add up over time and frankly, it’s ridiculous for to you to pay a fee just to receive your money.
Often times a factoring company will require you to commit to factoring a minimum volume of invoices. Failure to meet the agreed minimum amount can result in extra fees or a percentage surcharge. Take into account your typical invoice amounts and calculate if you will have an issue trying to meet the minimum requirements. Keep in mind not all factoring companies have this policy or fee.
Although your credit is not taken into account, your client’s credit is. The creditworthiness of your client must meet a certain standard for certain factoring companies before they agree to factor your invoices. That’s right, some companies will charge you a fee for that credit check.
You might decide to factor for a variety of reasons. Unavoidable circumstances might arise making it difficult to cover your operational costs. Truck repairs are extremely costly and unpredictable at times, especially for owner-operators and having a reliable truck that is fully functional is essential to your business. If you run a small fleet, wages, insurance, and taxes further compound your expenses.
This brings the length of terms to factor into play. Most factoring companies offer three to six-month term agreements to factor with some even require one-year contracts. It’s important that you review and consider your options when considering the length of terms.
Be sure to choose the best fit for you. If you’re confident that you won’t be factoring for an entire year or that you want to explore other options after a few months, you should consider factoring with a company that doesn’t have a minimum length of terms agreement.
Let’s say you have been factoring with a company for six months now. You have received payment days after hauling a load and it’s been beneficial in helping you generate cash quicker to cover your expenses. Now you have ample funds and decide that you don’t need to factor for the next few months.
The factoring company won’t let you out of the contract because you agreed to factor for a certain length of time. In order for you to stop factoring, you have to pay a fee up to $1,000.
That’s ridiculous, right?
Before choosing to do business with a factoring company, you should take into account these potential hidden costs and fees in the fine print of a contract. Freight Factoring helps manage your trucking company’s cash flow and takes the hassle away from client collections, allowing you to focus on growing your business and hauling more freight.
You shouldn’t feel that you are being fleeced by an unusual amount of fees that you weren’t aware of or deal with. Trucker Path InstaPay is freight factoring that pays you in a day with no hidden costs, fees, minimum commitments or contracts with pages and pages of fine print to sift through.