What Owner-Operators Should Look for in a Freight Factoring Company

Phil Cohen

In the trucking industry, being an owner-operator means being your own boss. Consistent cash flow for owner-operators is essential to keep business moving smoothly and your truck(s) on the road. Unfortunately, customers don’t always pay on time. Freight factoring for owner-operators is an alternative funding option trucking companies can utilize instead of waiting to get paid for loads already hauled.

There are approximately 350,000 owner-operators registered in the United States, which is about 9% of truckers on the road. With the working capital, transportation factoring provides, truckers have fast cash to pay for fuel, cover payroll, and fund any on-the-road expenses. But what if you’re an owner-operator who never worked with a truck factoring company? How will you know if you are choosing the best freight factoring company?

Freight Factoring for Owner-Operators Defined

Freight factoring also known as truck factoring, is the process of selling your outstanding freight bills for a cash advance. Transportation factoring is not to be confused with a loan. You won’t acquire more debt or pay high-interest rates.

NOTE: Freight factoring is only available to owner-operators who operate under their own authority.

How it works:

After the truck driver delivers the load as normal, the truck driver submits the accounts receivable to the factoring company. The freight factoring company then verifies the invoices and advances you up to 98%. Factoring advances can be funded by wire, ACH, or applied directly to a fuel card. The factoring company collects payment from freight brokers or shippers.

Because there aren’t setup fees and the application process easy and fast, you’ll be able to factor freight bills within just a few short days. After you’ve been approved, your trucking company can take advantage of same-day funding on copies, fuel advances, and free fuel cards that offer big discounts at the pump. Now that you know how transportation factoring works, its time to find a freight factoring company best fit for you. 

Top 6 Things Owner-Operators Should Look for in a Freight Factoring Company

With working capital your trucking company can buy more trucks, hire additional drivers and haul more profitable loads. While there are a large number of factoring companies in the U.S., not all freight factoring companies are the same. How will you know if you’re choosing the best freight factoring?

We’ve highlighted what owner-operators should look for in a factoring company below.

Expertise and In-Depth Knowledge of the Trucking Industry

Not only are all factoring companies unalike, but they also don’t all specialize in transportation factoring. There is no one-size-fits-all when it comes to factoring companies. When you are searching for the best freight factoring company for your owner-operator truck business, think of what your needs are. Freight factoring rates, services, and programs vary. You’ll want to choose a freight factoring company that has experience working with owner-operators. How long have they been in business? Longevity in the freight factoring business validates their experience.

As an owner-operator, you know the trucking industry is ever-changing. The freight factoring company you choose for your business should also have industry knowledge. Are they up to date on current market trends? Are they familiar with the shipping process? These are all questions you can ask your potential funder.

Top-of-the-line Customer Service

The reputation of a company says a lot about how they conduct business. Providing great customer service should be the main priority for a factory company especially since they are the ones who deal with your customers directly. While scouting for freight factoring companies for owner-operators, a quick Google search can tell you a lot. Check their website and other platforms for ratings and testimonials. Perhaps they have Google reviews. You may even consider asking other owner-operators and those in the trucking industry. Are they well-respected in the factoring industry? Do their business reviews reflect a positive standing? Do they have references? You should feel confident in your choice since it will not only affect you. 

Transparency in Freight Factoring Terms and Fees

When it comes to freight factoring, flexibility is very important. Before signing a factoring agreement, read the fine print and know the contract terms. Freight factoring companies should offer factoring on your terms. Let’s say you haul for a broker or shipper who pays on time. You shouldn’t have to factor all your receivables. The best freight factor will give you the ability to choose. If you don’t want to be locked into a long-term contract, find a factor that offers a month-to-month agreement with no minimum volume requirements.

Freight factoring fees for owner-operators can range from 1%-5% depending on the program. Most factoring fees are determined by volume — the more freight bills you factor, the less you’ll pay in fees. A factoring company could offer low rates but you could bite the bullet with fees. Ask questions about their rates, flat fees, and hidden fees. There are plenty of transportation factoring companies for owner-operators out there that offer funding on your terms.  Be sure to ask up front what their factoring terms are so you aren’t getting a bad deal. Transparency goes a long way.

Easy Approval and Same Day Funding

The truck factoring process should be quick and easy for owner-operators. Approval for freight factoring is based on the credit-worthiness of your customer(s) so as long as you have credit-worthy customers, approval should be painless. Find out the steps in the factoring company’s approval process. What documentation is required for owner-operators? How long does it take to be approved?

There are freight factoring companies that offer cash advancing in as little as 24 hours. You shouldn’t have to wait weeks or months to get working capital. Same day funding can put you back on the road to growing your owner-operator trucking business.

Recourse and Non-Recourse Factoring

There are two types of invoice factoring programs that you may choose depending on your customer’s reliability: recourse factoring and non-recourse factoring. With recourse factoring programs, you as the client will be held liable to close any unpaid invoices once they are outside the recourse period. In non-recourse factoring programs, the factor is held liable for unpaid invoices.  Each program comes with different terms and fee structures. There are pros and cons to both non-recourse and recourse factoring programs that can be explained further by your factor.  Learn more about recourse and non-recourse factoring here.

Fuel Advance Programs

As an owner-operator, fuel is the largest and most important expense you’ll face. Finding the best freight factoring company for your trucking business should involve finding one who offers a fuel advancement program. Fuel advance programs are great for owner-operators and small fleets who are tight on cash. With fuel advances, owner-operators receive cash upfront before delivery. This means owner companies have the ability to haul more loads and accept better loads.

6 Things Owner-Operators Should Look For in Factoring Company

What Additional Incentives Do They Offer?

The top freight factoring companies should offer additional services for truckers Make sure you’re reaping all the benefits of freight factoring for owner-operators and a small fleet. When selecting a truck factoring, ask what other perks are offered. These services can include:

  • Fuel card programs
  • Same day funding on copies or faxes
  • 24/7 online account access
  • Free credit checks
  • Complimentary load board access
  • Insurance assistance for new trucking companies

Finding the Best Freight Factoring Company for Owner-Operators

Scouting for the top transportation factoring company can be hard and time-consuming. Let us do the work for you.  With years of experience, we work with a range of top-notch freight factoring companies all over the U.S. and Canada. We pride ourselves in learning about your company’s needs so that we can match you with the best transportation factoring company for your fleet. Just give us a call or fill out a free quote form. Making more money as a trucking owner-operator is essential to surviving in the trucking industry. If you can’t afford to wait 30, 45, or even 60 days to be paid, truck factoring is the answer to your cash flow problems.

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Phil Cohen

Phil is the owner of PRN Funding and sister company Factor Finders. He has been an authority in the factoring industry for over 20 years, serving on the board of directors for several factoring associations.


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