So many times, we hear truck drivers and trucking company owners telling us stories about how they had been misled on the terms of their contract with their current freight factoring company. There were hidden terms or fees, monthly minimums that weren’t stated upfront, and a misleading length of contracts.
Freight factoring is a great asset to many truck drivers, providing you with consistent cash flow to run a successful trucking company. It’s unfortunate that some factoring companies take advantage of this. This is why we are here to educate you on what to look out for to avoid becoming a part of these horror stories!
All stories below are real (the names have been changed to hide identities).
Horror Story 1:
Company ABC Trucking signed on with XYZ Factor for a 1 year, recourse agreement. The money that hit their bank account after running a load didn’t match the amount of the load’s worth. In the contract, the reserve amount is not listed. Therefore, XYZ Factor varies how much they give the carrier as it is up to their discretion. ABC Trucking can only terminate the contract between 120 and 90 days out from the contract renewal, locking them into an agreement that is taking money from them.
What to look out for:
If there is a reserve, make sure the reserve amount is stated in your contract. Otherwise, the amount is up to the factor’s discretion and could change every fund.
Understand the termination terms of your contract before you sign up.
Horror Story 2:
ADZ Trucking signed a recourse with no reserve, one year contract with GGG Factors, but it’s not as simple as that. Hidden terms stated the rate can be adjusted each month depending on how much volume ADZ Trucking brought in the previous month. It was also hidden that GGG Factors has the right to change the reserve at any time. ADZ Trucking signed on with no reserve, but GGG Factors can increase the reserve to 5% if they want. There was also no early termination option for ADZ Trucking if they decided they want to leave and if ADZ Trucking never factors a load, but signs the contract, they must factor $2,500 in admin costs, but it still doesn’t terminate the contract. GGG Factors had only paid ADZ Trucking $7k of the $100k they sent them in the 2 weeks they’ve been signed on. They only have one login, and their client reps send them google links to search instead of helping solve the issues hands on.
What to look for: