There are many factoring companies that specialize in truck factoring, or financing transportation companies. The truth is that most of them do a really good job, providing a professional, honest product. Do some research on the International Factoring Association website, www.factoring.org, to find this solid, core group of factoring companies. Companies looking for a new factoring company should ask their associates in the trucking industry for referrals to companies that have done truck factoring. Once that group of factoring companies has been identified, then it’s up to you to research which firms have the characteristics you value the most.
The following is a list of some simple characteristics that you need to prioritize before you start shopping for a factoring company:
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Flexibility -- In my opinion this is the most important characteristic of any factoring company. As the CEO of a business myself, what’s most important to me when interviewing vendors is how flexible they are with the delivery of their product. I am usually willing to pay a little more if I know that my vendor is there for me when I need them. I have found the best way to assess the flexibility of companies is to give them several hypothetical situations and see how they respond. That way, you get an idea of how decisions are made at the different levels inside the factoring companies, and you get an opportunity to find out if the ultimate decision-maker is available to you if needed.
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Technology -- Over the past several years, new technology has become available in the factoring industry. The days of mailing or faxing invoices to your factoring company are mostly a thing of the past. Ask how your invoices are to be transmitted to the truck factoring company, and how you are notified when invoices are paid and when advances are made. Run through the creation of a new customer, invoice and advance with the factoring company and take note of how their technology works. Time is money. The less time you and your staff spend with your financing, the more time you’re able to spend running other parts of your business.
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Pricing -- If the most important thing for you is pricing, give the factoring companies you are speaking with as much information as you can about your company and your customers. Make sure all the factoring companies have the same information and that you are comparing apples to apples in your quotes. Remember that while a company might have lower pricing at first blush, you need to make sure they are giving you a full quote, including all the ancillary charges that come with their services.
The following is a list of some the fees that different factoring companies charge. You can use it as a guide when speaking to different truck factoring companies.
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Factoring Commission or Discount Rate -- This is typically the largest fee that each invoice incurs. Make sure you understand how it is determined for each invoice, based on how long they remain outstanding.
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Factoring Minimums -- The required monthly, quarterly or yearly amount that you will be required to factor.
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Application Fees -- The cost to apply with a new factor.
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Minimum Discount Fee -- For small invoices, some factors charge a minimum fee. It can add up.
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Maintenance Fee -- This is a monthly fee charged to the account for general processing.
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Wire Fee -- The cost to be sent a wire.
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ACH Fee -- The cost for direct deposit.
Make sure to give yourself enough time to do your research. The last thing you should do is wait until the last minute, then go with whichever factoring firm answers the phone first.
The factoring firm you select will have an influence on how your firm progresses. To do the most for your company, decide which of the criteria above matters most to you, and do your research on potential factoring companies to help you grow your business.
Fast A/R Funding specializes in truck factoring. Download our informative “Factoring 101” guide, or call 888.833.2286 to speak with one of our small business finance consultants.