Turn Deliveries Into Dollars with Freight Factoring

Freight factoring companies typically charge a fee ranging from 1% to 5% of the invoice amount. However, determining the true cost of factoring can be complex as additional or hidden fees may apply.

Factors to consider include whether the company charges a flat rate or a variable rate. Flat rates are a single fee for each invoice. Variable rates can change based on how quickly your customer pays, how much you invoice each month, or special offers that run out.

Businesses must understand all potential charges associated with factoring. Hidden fees such as application fees, credit check fees, processing fees, or wire transfer fees can add up fast. Don't overpay for factoring. Get a free fee analysis and see how much you can save compared to other companies.

Freight factoring has no direct impact on business credit (positive or negative). Factoring won't hurt your credit score since it's selling invoices, not a loan.

While factoring itself doesn't affect credit, making on-time payments with the extra cash flow can help build good business credit. This may help you better qualify for credit or loans in the future.

Here are the main types of freight factoring fees you may find in a factoring agreement:

Factoring Fee: This is the primary fee charged by the factoring company, typically a percentage of the invoice amount. Factoring fees are offered at a flat rate or variable rate.

Funding Fee: This fee is applied when funds are transferred to your account. They are typically more known by the method of payment:

• Wire Transfer Fee: Faster than an ACH transfer, typically offered for a slightly higher fee.

• ACH Transfer Fee: Slower than a Wire transfer, typically offered for a slightly lesser fee.

Invoice Processing Fee: Some factoring companies might charge a fee for processing each invoice.

Monthly Minimum Volume Fee: Some factoring companies require a minimum invoice amount each month. If you don't invoice enough, the factoring company charges a penalty fee.

Credit Check Fee: The factoring company may charge you a fee to run credit checks on your customers.

Early Termination Fee: In case you end the contract before the agreed term, an early termination fee may apply.

Qualifying for freight factoring is simple! The 3 main things you need to qualify are:

1) Invoices: You must invoice business clients (B2B). Factoring is not a good fit for consumer clients (B2C) or for those doing work on a COD basis.
2) Creditworthy customers: We care about your customers' credit, not yours! Get approved for factoring based on their ability to pay. Reminder: We provide free credit checks.
3) Proof of delivery: You must provide your POD and rate confirmation prior to selling your invoice. Reminder: We provide a convenient online funding portal.

We offer a quick & easy application process. Get approved within hours. You’ll just need the following:

1) Application: You can complete a simple, 1.5-page form in just a few short minutes.
2) Driver’s License: We require a clear, color copy of a valid driver's license.
3) Articles of Incorporation/Organization (does not apply to sole proprietors)
4) Operating Authority: You can apply for factoring while your authority is pending, but it must be active before your first funding.

Get qualified today!

Choosing a reputable factoring company is an important decision. There are many good factoring companies, but less reputable companies can have a profound impact on your business due to issues around lack of service, locked-in contracts, punitive fees, and more.

We recommend reviewing https://www.transwestcapital.com/blog/how-to-choose-the-best-freight-factoring-company-for-your-trucking-business for more information.

There are several things to look for in a freight factoring contract. Don't just focus on price! Some factoring contracts have hidden fees and terms that can cost you. Here are some things to consider:

• Factoring rates: Rates may be flat or variable. Watch for promotional rates that balloon to a higher rate after a certain amount of time. Watch for factoring rates that sound too good to be true.

• Advance rates: A higher advance rate keeps more money in your hands. In many cases, you can expect a FULL advance.

• Hidden fees: Watch contract documents that are excessively long or have language that is difficult to understand. This is often a way for other factoring companies to include hidden fees in their contract.

• Contract term: Review the contract for how long your commitment will be. Some companies may offer 6- , 12-, 18-, or 24-month contracts, while others may offer a month-to-month agreement.

• Contract termination terms/automatic renewal: Some companies offer a restrictive termination period. Miss the cancellation deadline, and your service will automatically renew.

• Punitive fees: Some companies charge a hefty fee (thousands!) if you quit or switch factoring companies.

• What happens if your customer doesn’t pay
  Factoring agreements may include recourse or non-recourse arrangements.
  In a non-recourse arrangement, the factoring company assumes the risk of non-payment in cases of customer insolvency.
  In a recourse arrangement, you assume the risk of non-payment. But, factoring companies will have different requirements to repay invoices (i.e. due upfront vs. a payment plan from future invoices).

You can typically write off factoring fees as an ordinary and necessary business expense, as defined by the IRS. However, as with any tax-related question, talk to your tax advisor to see if factoring fees are tax-deductible for your business.