Factoring for Owner Operators: What You Need to Know - OTR Solutions

Everything You Need to Know About Factoring for Owner Operators

Truckers often need to find ways of getting cash flow in order to keep their businesses running. One option is factoring, which can provide the money you need quickly and easily. However, there are a few things you should know about factoring before you decide if it’s right for your business. In this post, we’ll pull from our extensive knowledge and experience here at OTR Solutions to outline the basics of factoring and answer some of the most common questions about it. Read on to learn more!

What is factoring for owner operators and how does it work?

Truck factoring is a type of financing that allows trucking companies to sell their invoices at a discount in order to get immediate funding. Essentially, it allows businesses to get paid for their products or services immediately, rather than waiting for customers to pay their invoices. The trucking company sells its invoices to a factoring company at a discounted rate and, in exchange, the factoring company provides the owner operator trucking company with cash up front. This cash can be used to cover operating expenses, such as fuel and maintenance, or to purchase new trucks and trailers. 


There are a few things to keep in mind when considering truck factoring. First, it is important to choose a reputable factoring company that offers competitive rates. Second, it is important to consider the discount rate being offered by the factoring company and the time it will take to receive funding. Truck factoring can be a great way for trucking companies to get immediate funding, but it is important to do your research before entering into any agreement.


Factoring companies for owner operators speed up the payment process and keep your business running smoothly. But how do they work? Truck factoring companies will advance you the total payment for a completed load less a percentage of the total invoice value. Simple, right? If you’re looking for a way to improve your cash flow, truck factoring could be a great option for you. Give it a try!


The benefits of using truck factoring for owner operators

Trucking is a vital industry that keeps the economy moving. However, it can be a tough business to be in, with long hours and tight deadlines. Owner-operators often find themselves struggling to keep up with the expenses of running their business, such as fuel, maintenance and repairs. Truck factoring is the solution and there are many benefits to using factoring services:


Factoring can help you improve your cash flow

Having access to quick funding can help you cover expenses and keep your business running smoothly.


You can get paid quickly

When you factor your invoices, you will typically receive payment within 24-48 hours. This is much faster than waiting 30-60 days to get paid by your customers.


You don’t have to worry about collections

Once you have sold your invoices, the responsibility for collecting payment falls on the factoring company for truck drivers. This can save you time and stress.


It can help businesses build their credit history. 

By making timely payments to the lender, businesses can build a positive credit history that will serve them well in the future.


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Navigating the financial aspects of trucking has never been easier. Introducing OTR Clutch – the first banking solution exclusively built for truckers. Enjoy benefits such as fee-free overdrafts, 0.25% cash back on every dollar spent with the OTR Clutch Debit Card, and an advanced mobile app tailored to your banking needs on the go. With end-to-end encryption, OTR Clutch ensures your finances and information remain secure, while allowing you to manage, deposit, and spend from anywhere. Experience a banking solution that truly understands the life of a trucker.


More FAQs about Truck Factoring

You may have heard about truck factoring but are not quite sure how it works. Here are some answers to common questions that will help you understand this financing option. You can also visit our full page of FAQ right on our website for more info.


How much do factoring companies charge?

When you use a factoring company, you’ll be charged what’s called a discount fee, otherwise referred to as a percentage fee, on the dollar amount of the invoice being factored. The amount of the percentage rate varies based on services offered, program type, and monthly factoring volume just to name a few, but to give you an idea, rates range from 1% for fleets and between 2.5% – 3.5% for most carriers.


What is Recourse vs. Non-Recourse Factoring?

When a business sells its receivables or invoices to a factor at a discount, it is engaging in invoice factoring. In a non-recourse arrangement, the factor assumes all the credit risk associated with the receivables. This means that if the debtor does not pay, the factor must absorb the loss. In contrast, recourse factoring involves much more risk for the business. If the debtor does not pay, the factor can come back to the business for payment. Recourse factoring is more expensive than non-recourse factoring because it is a higher risk proposition for the factor. As a result, businesses typically use non-recourse factoring for owner-operators unless they are unable to obtain financing on any other basis.


Why use factoring vs. QuickPay?

QuickPay is offered by some brokers and is another option for truckers to get paid fast, however it often takes  longer than freight factoring does. Up to 5 days vs less than 24 hours! Quick pay rates are often comparable to factoring, but with the lack of inhouse, dedicated, customer support and the extended pay times, it’s clear factoring offers more value to your business than a one off quick pay.  For instance, factoring offers an organized and centralized source for all your back-office needs. QuickPay doesn’t. Factoring offers fuel cards. QuickPay doesn’t. Factoring helps you find loads. QuickPay doesn’t. In general, factoring just gives you a lot more control over how you get paid. 


How do I leave my current factoring company to come on board with OTR?

You want to be using the best factoring company for owner operators, right?  Since you  can only use one factoring company at a time, leaving your current factoring company for OTR Solutions will require us to purchase, or buyout, your outstanding invoices. Check your contract with your current factoring company to find out if they are going to require anything of you. They may have early termination fees, for example, and you will want to be aware of those.


How to get started with truck factoring

In order to get started with OTR Solutionsfactoring for owner operators, you’ll need to first fill out an application. The application will ask for basic information about your business, including how much money you typically invoice each month. Applying with OTR Solutions is completely free and requires no credit checks on yourself or your business for approval. After you’ve submitted your application, we will review it and let you know if you’re approved for our services. Once you’re approved, the next step is to sign a contract. This contract outlines the terms of your agreement, including the fees we charge for our services. Once the contract is signed, and other items are received from you including a valid driver’s license, W-9, banking information and Certificate of Insurance (COI), we can begin funding your invoices, and you’ll start seeing the benefits of a factoring company for truck drivers in no time!


Ready to get started with Factoring? Contact us today!

As you can see, factoring for owner operators can be a great solution for businesses that need to get paid quickly for the products and services they provide. If you’re ready to get started, contact us today! We would be happy to answer any questions you have and help you get started with this valuable financing option. Thanks for reading, and we hope you found this information helpful.

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