Finding the best freight factoring company can be a challenging task. It can be difficult to find exactly what you’re looking for in today’s market with all of the options and inaccurate information out there. We’re here to help with the understanding that you are trying to grow and succeed as an owner-operator. In this blog, we uncover some of the most common myths about factoring, choosing the best freight factoring company, and how they can affect your business.
MYTH #1 – “Freight Factoring Hurts Your Credit Score”
Many believe that using a freight factoring service can negatively impact their credit score. However, this is not true. In fact, factoring can help improve your credit by ensuring timely bill payments to your creditors. And when you factor with OTR Solutions, no credit check is required to apply.
MYTH #2 -“You Lose Control Over Your Invoices”
There’s a common misconception that factoring companies take complete control over your invoices, leaving you with no say. The truth is, reputable factoring companies like OTR Solutions work with you, keeping you in the loop and respecting your client relationships. With the OTR Mobile App and Client Portal, you have 24/7 access to your invoices, payment statuses, and documents.
MYTH #3 – “Freight Factoring Is Only for Struggling Companies”
Some believe that factoring is a last resort for businesses in financial trouble. In reality, freight factoring is a strategic tool used by financially savvy companies to maintain steady cash flow and support growth.
MYTH #4 – “All Non-Recourse Programs Are Alike”
The truth is that not all non-recourse programs are alike.
You could be considering two non-recourse programs that are completely different from each other. One could be a generic non-recourse program with 60-90 day chargebacks and the other could be a true non-recourse program with no chargebacks or fees, like OTR’s program, so it’s hard to compare when no two programs are the same. But it is important for your business that you know how to spot different types of programs.
Usually, the rate is a telling sign of the type of program you are researching. Value and customer service should be considered just as important as rate when searching for the best freight factoring company. When you come across a very low rate, that factoring company usually needs to make up for the low cost with restrictions and terms that can end up costing you more in the long run and take away much of your freedom as a business owner. The difference between these two types of programs becomes clear when the lower the rate means less incentive for the factoring company to handle paperwork correctly, bill on time, and properly collect.
Though you might only work with good brokers who pay in 30-45 days, keep in mind that broker pay terms start when they are invoiced with the correct paperwork. When there is a long wait period in the factoring process, fees, pay delays, and unresolved paperwork can become an issue directly affecting pay terms.
MYTH #5 – When a Factoring Company Tells You There Is “No Contract”
When there is money involved, it will always be necessary to sign a contract.
Factoring companies offer tens, sometimes hundreds of thousands of dollars to businesses in hopes to receive the funds back in 30 days and need a contract to do business with you.
If a freight factoring company advertises a “no contract” program, that should immediately be a red flag, and more digging should be done before doing business with them. While the length of the contract may vary, generic non-recourse contracts will have hidden terms and conditions that typically lock you into using their services for all delivered loads and make it impossible for you to terminate your contract without excessive fees. When you factor with OTR Solutions, your contract has transparent terms, no hidden fees, and no chargebacks.
A great freight factoring service helps carriers of all sizes and makes sure to communicate the details of your contract and walk you through what you should expect when you factor.
MYTH #6 – “Brokers don’t like carrieres who factor”
It is more accurate to say that brokers don’t like certain factoring companies.
Brokers need a complete, legible, and timely invoice to get paid by their customers. If a factoring company is slow at billing or always bills incomplete or illegible paperwork, that broker will most likely not want to call you for the next load they need to be covered.
The truth is that freight factoring companies have the responsibility of working with brokers every day and to build quality relationships with them on behalf of your company. While every freight factoring company has this responsibility, there are different standards that they hold themselves to. For example, OTR Solutions bills brokers the same day that you factor and actively follows up with the broker to make sure it is set for payment.
In this case, OTR Solutions has the due diligence to help your company build a better relationship with your brokers, and attempts to avoid any situation where your broker would have to question you for a delayed invoice. Our goal is to collect by the broker’s stated payment terms and we ensure this by calling brokers every 7-10 days for each invoice.
MYTH #7 – “You Can’t Afford Freight Factoring Rates”
Factoring your loads will cost less than paying a full-time employee or not being paid for loads that you run.
For a small percentage, you can have a dedicated team who are checking your invoices, sending bills to your broker, and getting you paid faster than you normally would. Working with a freight factoring company means that you get your money on time and have the option to use them as your back office, all while being able to write off your factoring fees on your taxes.
For those who are factoring, we understand that carriers are looking to cut costs more than ever. Although you may be re-negotiating a lower rate with your current factor or looking at other companies for a lower rate, it is very important to keep all of the costs and risks associated with lower freight factoring rates in mind. With the wrong factoring company, poor customer service can delay pay times and keep you on hold for hours, which will end up costing your company more time and money than it needs to.
Although factoring with the right company can mean a slightly higher rate, it can cut down on the time you would have to spend managing paperwork or money you would need to staff a back office and provide your business with more value. You should avoid hidden fees, monthly minimums, poor billing and collecting practices that can cause chargebacks at all costs.
Factoring Myths Uncovered
We hope this article has helped clear up some common myths about factoring and highlighted key factors to consider when choosing a freight factoring company. Remember, OTR Solutions is always here to support your trucking business needs.
It’s important to remember that a lower rate can sometimes mean a longer and more restrictive contract. Sometimes, paying a slightly higher rate can save you more in the long run.
Have more myths you want us to bust, or specific qualities you look for in a freight factoring company? Reach out to us at partners@otrsolutionscom, and you might be featured in our future posts! For any questions, don’t hesitate to call us at (678) 507-3370. We’re here to be your trusted partner in the trucking industry.
Get Started