The Trucker Newspaper - September 15, 2018

28
PRESENTED BY MYSTIK LUBRICANTS
To ease administrative burden of job, many truckers turning to factoring
Cliff Abbott
cliffa@thetrucker.com
When profit margins are small, as they
are in the trucking industry, cash flow is
crucial. Drivers aren’t generally known for
patience when pay settlements are delayed
or incorrect. For the truly independent small
trucking business owner, a thriving business
can go bust horrendously fast when customers
don’t pay their bills on time or at all. In
addition, there’s enough to do finding loads,
hauling freight and meeting all the regulatory
requirements of a trucking business.
Repeated collection calls waste time and increase
frustration levels.
To ease the administrative burden and
keep the cash flowing, many drivers turn to
factors.
By definition, a “factor” is an agent, or
one who acts or transacts business for another.
In trucking, the business of factoring
usually involves billing, collection and other
financial services. The trucking company lets
the factor do the accounts receivable work in
exchange for a small percentage of the collected
cash.
A simple Internet search for “Freight Factoring”
will turn up a long list of companies
willing to perform the service, but there are
many variables and it’s good practice to investigate
thoroughly before turning collection
duties over to a factor. Rates can vary, as
can services provided.
Broken down to basics, the service is
simple. The trucker books a load and contacts
the factor with details, including freight
charges. Usually, there is an approval process,
the factor may not accept customers
who haven’t paid in the past or who have
poor credit ratings. If approved, the load is
delivered and the delivery paperwork sent to
the factor. The factor bills the customer, collects,
and pays the trucker, minus the agreedupon
percentage.
Most factoring services have an advance
program and will advance funds when the
load is approved and booked. Advanced
amounts range from fuel money to almost all
of the load rate. It’s important to clear up this
detail up front.
How the cash is paid is another area to inquire
about. Some factoring services load the
funds onto fuel, credit or debit cards, some
deposit directly into the trucker’s account.
Some offer fuel and tire discounts, hotel discounts
and other services along with the card
used.
Another variable is timing, when the cash
is paid can be more important than how it
is paid. Some services pay within a couple
of hours of receiving load information while
others may delay 24 hours or longer.
Every factoring service will perform a
credit check on the customer, but some will
provide guidance before the load is booked,
running the check or providing information
from their own experience. Some provide
this service for free while others charge a fee
for this service. Either way, the information
Most factoring services have
an advance program and will
advance funds when the load is
approved and booked. Advanced
amounts range from fuel money
to almost all of the load rate.
is valuable in that it helps the trucker make
good business decisions and avoid customers
with a poor payment reputation. Some even
provide load boards where only approved
customers are allowed to post their loads.
The mechanism for paperwork submission
is another area to consider. Collecting
paperwork and then finding (and paying to
use) a fax machine to send documents to the
factor is a cumbersome and old-fashioned
process. Many factoring services have phone
apps that allow a quick photo of the paperwork
to be emailed. Account management
apps and programs are provided so that submissions,
deposits and other details are instantly
accessible.
One critical factoring option is whether
the service is “recourse” or “non-recourse.”
The basic difference is in whether the trucking
business has to pay back funds advanced
by the factoring service if the customer
doesn’t pay. In recourse factoring, the trucker
has to repay advances. The advantage is
that the factoring fees are cheaper.
Non-recourse factoring means that the
factoring service absorbs all the risk. If the
customer doesn’t pay, the trucker keeps all
advanced funds. The trade-off is that fees are
higher for this option.
If the trucking business has good customers
with solid credit ratings who pay on
time, recourse factoring keeps the fees lower.
If the business is based on load boards and
fewer repeat customers, non-recourse factoring
can be a good option.
Finally, it’s always a good idea to read the
fine print in any agreement. Factoring services
may charge fees for different services
and even a fee for termination of the agreement.
Use of a factoring service may ease the
administrative burden of running a trucking
company, large or small, but the responsibility
of understanding the agreement still rests
with the trucker.
Factors can make life easier, but there are
potential pitfalls. The right factor with the
right agreement can help a small trucking
business owner concentrate on the business
of moving freight. 8
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