What is factoring?
Freight factoring is a pretty simple concept that’s been around for a long time. A business owner decides that they’d like to speed up payment on their slow-paying invoices, so, rather than send those invoices to their customer directly, they scan or fax them to the factoring company who will process the invoices and typically advance the company between 80-95% of the face value on the invoice but don’t worry Flux capital will fund 100% of the face value minus the discount fees applied. This held back amount (5-20%) is returned to you, minus the factors fee, when your customer pays the invoice. Having the cash in hand today rather than in 30-90 days helps with cash flow and gives you the ability to purchase fuel, pay insurance premiums, pay drivers, etc.
Who uses factoring?
Factoring is used by all kinds of businesses, not just truckers. If a company has a large cash expense (like fuel) required to complete a job, factoring allows these companies to cover these costs without the burden of cash flow issues.
Is it expensive?
This is something we are asked on a regular basis. There’s a misconception that factoring is an expensive alternative to a bank loan, when in fact, a business will usually pay just a few pennies for every dollar factored. As an example, a $1,000 invoice will likely cost you between $25-40 in factoring fees. Most factors will also handle the collections on the account saving a business the cost of another staff member or the owner’s time handling the collections on their own. That being said, it’s important to work with a factor who has a good reputation and keeps the fees simple, fair and easy to understand.
How does it work?
The first step is to get you signed up. In most cases, this process takes less than an hour. Once signed up, simply fax or email the invoice, rate confirmation and proof of delivery to our office. We’ll enter it into our system and release up to 100% minus the discount fees to be applied of the invoice amount to you via Wire, ACH, E-transfer. We will then forward the invoice to your customer on your behalf. It’s that simple! As a convenience, our Client Web module is available online to you 24/7. It details all your account activity.
What’s the difference between a bank line and factoring?
With traditional bank financing, rates tend to be a little lower, however the approval criteria and restrictions are much greater. Banks will typically offer a fixed line of credit (LOC) that becomes a liability on your profit and loss statement and is tied to your collateral. This LOC often becomes difficult for companies to repay. Factoring grows as you grow. You’re advanced a percentage of your invoices up-front with no restrictions on growth and far fewer constraints. Factoring does not become a liability on your books and companies can stop factoring anytime.
What if I have bad credit?
Bad credit can always be explained and everyone runs into issues once in a while. We understand that. We use your shipper or broker’s credit to determine whether we can advance you on your invoices. By factoring your invoices and having cash available immediately, you can begin rebuilding your credit from day one.
What if I’m a new company?
No problem! Unlike banks, factors generally don’t require a long history of business. We provide you credit based on your customers credit worthiness. This allows you to get started right away. With 25 years of trucking experience, we can help you with several other services to insure your success.
Do I have to send you all of my invoices?
No. You can pick and choose which customers you’d like to factor. If you have certain customers that pay you right away, we are happy to help, but recommend you bill these on your own and avoid factoring fees. Some customers do find it easier to send in everything and utilize our 24/7 online account access to view and download all their account information. Either way, the choice is always yours.
Do you have long term contracts?
No. We are here to help you, not hinder you. Our agreement simply outlines the fees and we ask that you agree to the terms. Some factors claim no long term contracts only to require a payoff before releasing a UCC – 30, 60 or 90 days later. We believe you should always have a choice and if we are not providing you the level of service that you expect, then we should not stand in your way to find another factor.
What will my customers think?
You’d be surprised. Most of the shippers and brokers are well aware of factors and tend to prefer dealing with them directly. They recognize you are one of the responsible carriers who is looking after their business and see it as a positive. We work with thousands of shippers and brokers and it’s viewed no differently than a change of address to them
Can I try it or “kick the tires” first?
You bet! Click on the “Get Started” link below. We’ll waive the factoring fees for your first invoice and let you gauge our service. We are hopeful you’ll be very satisfied and we look forward to having you as a new carrier.
How long does the setup take?
All in all, we can have you setup and ready to go within 1 day. Click on the “Get Started” button below and one of our Business Development Managers will reach out right away. If you have invoices that have already been sent to your customers, we can likely get you funded on those as well – all within 1 day!
