What to consider when evaluating a factoring partner
Whether you are an owner/operator with a single truck or a small-to-mid-sized trucking operation with a modest fleet of vehicles, partnering with a company that provides comprehensive factoring services can be a great way to streamline your operation. Because factoring enables truckers to receive payments faster and handle invoicing and payment processing and collection for drivers, it allows them to focus on driving while maximizing cash flow and profitability. In other words: it can provide a boost both to quality of life and to the bottom line.
But what makes a good factoring partner? What should truck owners and operators be looking for, and how can they decide what factoring companies are likely to be a good fit for their needs?
Logistics, invoicing complexities, and payment delays are among the biggest headaches for independent drivers. A persistently high-interest-rate environment has further muddied the waters. The interest rates a factoring company borrows on can impact the amount they charge for their services—essentially passing on their extra costs on to their clients. Inflation has also affected the industry, lowering consumer spending and, consequently, tamping down product demand. Against this backdrop of rising operational expenses, tighter margins, and formidable maintenance, safety, regulatory, and compliance obligations, the last thing trucking company owners and operators need is to deal with additional invoicing and billing headaches. And that is where factoring comes into play.
The benefits of factoring service range from faster funding and approvals, to debt reduction and comprehensive back office support. For most drivers, the convenience is an added bonus, but the primary attraction is the ability to get paid for their work almost immediately. Particularly for smaller companies that may not have the resources to conduct timely collection and accounting oversight and may be hit harder by payment delays (which can and do result in waits of anywhere from 30 to 60 days to receive payment), factoring can be a game-changer.
The three biggest features most truckers cite when it comes to why they utilize a factoring company are:
- Speedy and efficient payment, ideally from a provider that offers same-day wire or some other form of digital delivery.
- User-friendly technology, such as an app that can be used on the go to facilitate more accessible and convenient communication servicing.
- Committed and comprehensive customer service from a factoring provider that goes above and beyond to build relationships.
The key theme connecting these elements is fast and efficient high-quality service: not just sending payment quickly but returning emails or texts immediately and being available when a driver calls with an issue. The best factoring companies are true partners who are readily available to support trucking owners and operators whenever and whatever their needs may be.
For trucking owners and operators, finding the right factoring partner for their business is largely a matter of doing the research—and knowing the right questions to ask. Considerations include the nature of the factoring services being offered, the terms and rates of service, and the provider’s history and experience in the space. Be diligent about asking for hidden expenses (like wiring fees), making sure there are no monthly minimums or confusing or misleading contract terms. To the extent you can, ensure they have the resources to provide you with the financial and service support you need. Check reviews and ratings: talk to other drivers and trucking owners you trust for unbiased feedback on their experiences. Make sure the payment system is both speedy and convenient. For example, with RoadEx’s RapidPay system, clients upload their invoice with their RoadEx factoring rep after completing a load delivery. And once their invoice is approved, money is deposited into their RoadEx RapidPay account in 10 minutes or less and ready to use on their card.
Two points many owners and operators tend to overlook:
- Rates matter, but it’s more about what you are getting than what you are being charged. Saving $20 a month won’t be very appealing if you aren’t getting fast, efficient and reliable service and payment.
- Make sure your factoring provider is able to offer all of the back-office and trucking services you need to achieve full financial and professional independence: not just factoring, but tags and licensing, dispatch and insurance needs, legal and contract reviews, and even maintenance and financing.
Ultimately, getting that all-inclusive and comprehensive back-office functionality, service, and support at a high level not only gets truckers paid faster, but makes every part of their job easier and more efficient.