In a previous article, we discussed the process that you should follow to select a factoring company. It shows you how to evaluate and select a factor that will be in the best position to help you. In this article, however, we discuss a few additional things to keep in mind if you are in the transportation industry.
While many factors claim to work in the trucking industry, only a few have the expertise to excel at it. Understanding this point is critical in your selection process. Don’t just search for the factor with the best rates. The importance of seeking the factor with the best rates and with expertise in the transportation industry cannot be overstated. Otherwise, you could end up working with a cheap but inexperienced factor and encounter problems later on.
Consider the following points when selecting a freight factoring company:
Question #1: How long have they been in the business?
This point may seem obvious, but you should work with companies that have been around for awhile. The transportation factoring industry is very competitive and fluid. Make sure to partner with a company with demonstrated longevity. Ideally, they should have been in business at least five years.
Question #2: Are they really transportation specialists?
The transportation industry is popular among factors, and many factoring companies claim to be transportation specialists. However, not every company is an actual specialist in the industry. Working with an inexperienced factor could be a serious liability. Determine if they are actual specialists by asking them some industry-specific questions. Are they familiar with industry terminology? Do they know who the main players are? Is the person you are speaking to familiar with all the paperwork required to deliver a load? You get the gist.
Question #3: Do they offer fuel cards?
Most transportation financing companies have a fuel card program. In fact, many have programs that combine the fuel purchases across their whole client base (e.g. a “cost plus” program), which can provide you with an important discount – a “must- have” feature for any company on your short list. By the way, not having a fuel card program should automatically disqualify most companies from your consideration.
An additional consideration might be if they also offer fuel advances. This is a special type of advance that is provided by certain factors as an “add-on” to their programs. It provides funding when you pick up a load, and is used to cover fuel expenses. This can be useful for small carriers that are low in funds.
Question #4: Do they finance freight brokers?
This question is valid only if you are a freight broker that needs factoring. Most freight bill factoring companies do not finance freight brokers – they only finance carriers. Keep in mind that companies that finance freight brokers often have a maximum advance of 90% and tend to pay the broker’s carriers directly to ensure that the carriers cannot place a lien on the freight bill.
Question #5: Do they provide unlimited credit reports?
One of the main advantages of partnering with a freight bill factoring company is that they can provide you with credit information on all your broker and commercial clients. Some factors provide this information over the phone, while others offer it through an online portal. Both methods work well, so it’s a matter of personal preference. As long as your factor provides you with timely answers, you should be OK in this area.
Question #6: Do they have experience working with well-known logistics companies?
One way to determine if the factors you are working with have transportation industry experience is to ask them if they have clients who work with well-known 3PL companies (e.g., C.H. Robinson). If this is the case, ask them about the company’s document submission and payments procedures. Check if the factor’s answers match your own experience.
One last point: be thorough
Most truckers and brokers try to get financing because they have run into a cash flow crunch a need immediate funds. While it’s clear that you have to move quickly, don’t choose hastily. Selecting the right factoring partner is critical to the long-term success of your company. Taking a few extra days to research your prospective partners goes a long way to ensuring that you have a successful relationship.
Can we help you?
We are a leading freight factoring company and would like the opportunity to earn your business. For more information, get an online quote or call us at (877) 300 3258 to speak with an expert.
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