Chances are, if you’ve ever been involved in the trucking industry, you’ve heard about freight factoring. Whether you’re an owner-operator or run a trucking company, you need capital to make sure your load gets from point A to point B.
You also probably know that freight factoring has varying rates. In a world with so many options to choose from, how can you make sure you’re getting the best freight factoring rate with the best factoring company?
Getting the best freight factoring rate
Explore your options
The best way to ensure you get the best freight factoring rate for your needs is by exploring all of your options. Call different factoring companies and do your own research on the internet. There is no such thing as being too informed on a topic.
Have your information ready
In order to find out what rates factoring companies are willing to give you, you’re going to need to have your information handy. Hold onto your MC or DOT number and be prepared to explain who you’re billing and how often you work with them. The more a factoring company or broker knows about your invoices, the more specific they can be on their rate.
Speak with a factoring expert
If you don’t feel like calling individual factoring companies, get in contact with several different factoring brokers. Factoring brokers do a good amount of the work for you. Tell them about your business and they’ll match you with a factoring company that fits your wants and needs. If they pair you with one that you feel offers you an unfair rate, just let them know and they’ll set you up with another.
What are rates based off of?
Rates are based on several things but heavily rely on these four main components.
- Monthly factored volume. How much you expect to factor on a monthly basis.
- Size of your invoices. This is how large each of your invoices is that you wish to factor.
- Industry. If you’re in transportation, your rates are going to vary greatly than if you were in construction.
- The credit of your clients. Since your clients are the ones responsible for paying back money to the factoring company, their credit needs to be relatively good. The better their payment history is, the more likely it is you will get a better rate on your invoices.
How do I qualify for freight factoring?
Have customers with good credit
As mentioned above, the better the payment history of your clients, the more likely it is you will get approved for freight factoring with a good rate. Because your customers pay the factor directly, they’re expected to have a good track record of paying their bills on time.
Have unpaid invoices
If you want to qualify for freight factoring, you need to have unpaid invoices! As long as they were issued within a reasonable time period, they’ll work!
Have either commercial or government clients
Factoring only works with companies that bill other businesses or the government. If you serve customers directly, factoring may not be the option for you.