What is Freight Factoring?

What is Factoring?

Factoring is the process of ‘selling’ your invoice to a 3rd party company after you’ve hauled and delivered a load to get immediate access to cash while the factoring company takes on the burden of collections from the broker or shipper.

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What is Factoring?

Factoring is the process of ‘selling’ your invoice to a 3rd party company after you’ve hauled and delivered a load to get immediate access to cash while the factoring company takes on the burden of collections from the broker or shipper.

Body (1000 x 800 px) (3)

What is Factoring?

Factoring is the process of ‘selling’ your invoice to a 3rd party company after you’ve hauled and delivered a load to get immediate access to cash while the factoring company takes on the burden of collections from the broker or shipper.

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Your Trucking Company Completes A Delivery As Scheduled

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Submit Your Unpaid Invoices To The Factoring Company

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The Factoring Company Pays You Within 24 Hours, Minus A Small fee

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The Factoring Company Handles Collection From The Broker

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The Broker Pays The Factoring Company In 60-90 Days

Why Factor?

With Factoring:
  • You deliver freight for a broker or shipper.
  • You send the invoice for that load to your factoring company.
  • The factoring company confirms the load information and sends you payment either the same day or within 24 hours for a very small fee (typically 1-4% of the payment).
  • The factoring company works with the broker or shipper to collect the full invoice payment and handles all billing and collections directly on your behalf.
           
Without Factoring:    
  • You deliver freight for a broker or shipper.
  • You send the invoice for that load to the broker or shipper that contracted you for the load.
  • You wait 30, 45, 60 or up to 90+ days to get paid from the broker.
  • You have to bill each load for each broker individually to keep up with all of the collections, billing discrepancies and non-payments yourself – leaving yourself open to risks that come with lack of cash.
     

Want to learn more about factoring? Check out this video from our team for more information on how factoring could help your business!

Want to learn more about factoring?

Check out this video from our team for more information on how factoring could help your business!

Ready to get started? Give Us a Call To Speak With a Dedicated Member of Our Team!

Call Us

Ready to get started? Give Us a Call To Speak With a Dedicated Member of Our Team!

Learn More

What Types of Freight Factoring Are There?

There are three different types of freight factoring programs: recourse, non-recourse, and TRUE Non-Recourse. Recourse factoring is the most common type of freight factoring because it typically has the lowest rate, meaning the lowest cost for factoring. However, this doesn’t always mean it’s the best choice for your business.

Non-Recourse Factoring
Non-recourse factoring provides more security than recourse because the factoring company assumes the risk of failed payment collections. Because of the risk that the factoring company takes on, non-recourse factoring rates are slightly higher than recourse rates. Unfortunately, many non-recourse factoring agreements come with hidden fees, chargebacks, and contingencies in the fine print that many trucking business owners miss.
OTR's True Non-Recourse Factoring
OTR Solutions offers the only TRUE Non-Recourse factoring program in the industry. Unlike generic non-recourse factoring, as soon as OTR approves your invoice, you get paid and STAY paid. No shady hidden fees or chargebacks even if the broker goes out of business and payment cannot be collected. This is the only type of factoring that can truly protect your business and ensure you have a reliable source of cash flow.
Recourse Factoring
In a recourse factoring agreement, you are responsible for staying on top of the collections for your factored invoices, and that means managing non-paying brokers. This means if the broker or shipper does not pay for the full invoice amount purchased, the factoring company reserves the right to charge you back for that amount. While the factor should make every effort to collect repayment, this is not always the case. They will simply charge back the load meaning you have to buy it back at a certain timeframe based on your contract terms.
OTR's Fleet Factoring
The OTR fleet factoring program, created for larger operations who need flexibility, delivers a scalable and highly adaptable service for fleets and mid-size carriers. With no restrictions on credit or customer concentration and several TMS integrations, getting reliable and consistent cashflow has never been easier.
Learn More
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What Types of Freight Factoring Are There?

There are three different types of freight factoring programs: recourse, non-recourse, and TRUE Non-Recourse. Recourse factoring is the most common type of freight factoring because it typically has the lowest rate, meaning the lowest cost for factoring. However, this doesn’t always mean it’s the best choice for your business.
Recourse Factoring
In a recourse factoring agreement, you are responsible for staying on top of the collections for your factored invoices, and that means managing non-paying brokers. This means if the broker or shipper does not pay for the full invoice amount purchased, the factoring company reserves the right to charge you back for that amount. While the factor should make every effort to collect repayment, this is not always the case. They will simply charge back the load meaning you have to buy it back at a certain timeframe based on your contract terms.
Non-Recourse Factoring
Non-recourse factoring provides more security than recourse because the factoring company assumes the risk of failed payment collections. Because of the risk that the factoring company takes on, non-recourse factoring rates are slightly higher than recourse rates. Unfortunately, many non-recourse factoring agreements come with hidden fees, chargebacks, and contingencies in the fine print that many trucking business owners miss.
OTR's TRUE Non-Recourse Factoring
OTR Solutions offers the only TRUE Non-Recourse factoring program in the industry. Unlike generic non-recourse factoring, as soon as OTR approves your invoice, you get paid and STAY paid. No shady hidden fees or chargebacks even if the broker goes out of business and payment cannot be collected. This is the only type of factoring that can truly protect your business and ensure you have a reliable source of cash flow.
Learn More

Factoring An Invoice Is Easy

When you submit an invoice with OTR, we will process your payment within 24 hours – no matter what. We use ACH transfers which are processed overnight. You can get access to your funds immediately using BOLT – this acts similar to a wire transfer but it’s even faster because it is paid directly to your debit card. Once your payment schedule goes out, you can trust the money is in your account.
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Submit Invoices

On the OTR Mobile App

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Invoice is Approved

By Your Dedicated Account Manager

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Get Paid Same-Day

On Your Invoices Submitted by 12pm

Factoring An Invoice Is Easy

When you submit an invoice with OTR, we will process your payment within 24 hours – no matter what. We use ACH transfers which are processed overnight. You can get access to your funds immediately using BOLT – this acts similar to a wire transfer but it’s even faster because it is paid directly to your debit card. Once your payment schedule goes out, you can trust the money is in your account.

Untitled design (15)

Submit Invoices

On the OTR Mobile App

Untitled design (19)
Untitled design (16)

Invoice is Approved

By Your Dedicated Account Manager

Untitled design (19)
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Get Paid Same-Day

On Your Invoices Submitted by 12pm

Freight Factoring FAQ

How do I know if I need freight factoring?
We have found that many carriers operate on a month to month, week to week, or even day to day basis with their available funds. This makes waiting 30, 60, and even 90 days to get paid on invoices incredibly difficult. Cash is flowing in and out at different times, and many carriers need access to their earnings sooner than that to be able to pay bills, employees, or even pay themselves.

Factoring gives a reliable source of income, so you can maintain access to your payments in a timely manner while letting the factoring company handle your back-office.
What type of factoring do I need?
We highly recommend all new authorities look for TRUE Non-Recourse factoring when they are first starting out. Most factoring programs will leave the collections process and liability to the carrier – meaning that you will need to handle the communications with broker/shipper after you deliver the load to ensure the payment is sent. This can take a long time and can be risky – where if the broker for whatever reason cannot pay, then you’re pretty much out of luck.

However, for TRUE Non-Recourse clients, once you submit an invoice and get paid – that money is yours to keep and you can focus on your next load rather than the paperwork and collections for your previous work. The rest of the collections process and all risk of non-payment is put on the factoring company, not you.
Is there a credit check required to start factoring?
No – no credit check is needed. We ask for documents such as proof of insurance, articles of ownership, and operating authority.
What other items should I look out for when considering factoring companies?
Not all factoring companies are created equal – and like many other things, there can be some companies who aren’t as transparent as others. Make sure to check online reviews and that the factor is an approved member of the International Factoring Associations (IFA) which creates the standards for best factoring practices. Before you sign agreements, always make sure to look out for:
    • Contract length
    • Factoring amount minimums
    • Chargeback terms
    • Collection terms
    • Tiered rates
    • Buyout possibilities
    • Other tools that come with the factoring program
    • Mobile app / web portal that you’ll be interacting with
    • Funding methods

Not sure what exactly to look for?  OTR will review anyone’s contract and explain the terms at no charge, whether you factor with us or not.  We’re here to help you understand the terms of your agreement.
Do I need to factor every invoice I have?
No – we do not have any minimums in our contracts. You can factor as many invoices as you want. You can factor some brokers and not factor others.
How long does it take to apply, get setup, and get paid?

Once you fill out an inquiry form our team will reach out to you within 24 hours! The signup process only takes a few minutes and you can be factoring your first invoice that very same day!

Is Broker Quick Pay faster than Freight Factoring?

Quick Pay vs. Freight Factoring is more a game of reliability and consistency than which is faster. OTR Solutions True Non-Recourse factoring program gets you paid in 24 hours or less. Quick Pay programs pay in 1-5 days, typically for higher rates and brokers can change your rate at any given time without notice. Additionally, unlike factoring with OTR Solutions, Quick Pay does not give you the ability to track the broker’s receipt of the invoice, invoice approval, or status of your payment. Factoring with OTR gives you transparency in every step of the process without sudden changes in your rate or payment times.  Working with a factor means you have one place to call to manage all of your freight payments.

What is freight? Who sets it up? How does it work for a carrier on a day-to-day basis?
Freight is the transportation of goods from the original destination to target destination. Typically, a shipper (think big box stores needing to move goods from a warehouse to smaller distribution centers) will work with a freight broker to facilitate the transportation of their goods. Then, a freight broker will post specific loads on a load board so that carriers can find and sign up to carry that load from the origin to the destination.
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