Should I Use Factoring or Quick Pays for my Trucking Company?
Freight factoring vs. broker quick pays
Consistent funding is important for the success of a trucking company. Operating expenses don’t stop, and neither should your cash flow. Truck drivers can wait anywhere from 30, 60, or 90 days to get paid without working with a factoring company or using broker quick pays. Both freight factoring and quick pay options eliminate the wait time by offering payment options to speed up cash flow.
There are some significant differences between the two and it’s essential to understand each one before deciding on what best fits your business needs.
Carriers can only factor with one factoring agent. This means you get paid from one entity on all load payments. Bank deposit information is securely stored with your factor, making sending in your freight invoices for a deposit or wire transfer the same every time.
There are different invoicing, logins, accounts, and paperwork for each broker a carrier uses.
Back-office and billing assistance is included in factoring services when working with a freight factoring company. Back-office support includes billing and invoice creation, accounts receivable and collections management, customer credit checks, and fuel advance distribution.
Typically, brokers don’t offer additional services beyond the quick pay.
Carriers can work with any broker or shipper (with acceptable credit) or load boards when they factor their invoices. Working with a factor helps truck drivers maximize profits by running the best paying loads.
Not all brokers offer quick pays. If a carrier depends on fast payments and doesn’t work with a factor, they may have to turn down higher-paying loads if there isn’t a quick pay option. If a carrier only uses quick pays from time to time, they can schedule their routes based on their cash flow situation at the time.
The best factoring companies will offer additional services like dispatching help, fuel cards, insurance partners, compliance help, and equipment financing.
Brokers rarely offer additional services to assist carriers in the trucking industry.
Rates vary depending on the size of the trucking company, monthly revenue, and years in business. Once a rate is set and a contract is signed, it will stay the same on every invoice factored. It’s important to make sure there are no hidden rates or fees in the factoring contract before signing it. It’s also important to note that some factors will match broker quick pay fees.
Broker’s quick pays are specific to their business, not the carrier. Some offer one program with a fixed rate, while others offer varying rates depending on payment time.
What is best for your trucking company?
The decision comes down to your business situation and preference. Especially for new carriers and smaller trucking companies, freight factoring provides your business with security on always getting paid in 24 hours for all invoice amounts. For carriers with established relationships within the industry and know the routes they will be running, quick pays are a great option.
For more information on what is the best option for your trucking business, get in touch with us today at (205) 397-0934 or reach out here.