Trucking companies often face a lot of challenges in getting clients’ payments. Sometimes, clients even take between 30 and 90 days to make payments. This is where freight factoring services can benefit trucking companies. By making upfront and fast payments for deliveries, such services can allow a trucking business to function smoothly. However, when signing up for this service, trucking company owners must be very careful to avoid certain mistakes that may prove costly.

Not reading the fine print

Many trucking companies often get charged a higher factoring fee than what was quoted to them before the signing of the contract. It arises from owners not reading the fine print before signing the agreement. Companies often realize this oversight after the first freight deal when they encounter several hidden fees in the contract. Therefore, while signing up for a factoring service, one must carefully review all the details mentioned in the contract. Opting for a factoring company that is transparent regarding their fees and payments will be a wise decision. If one notices that the company did not mention the charges despite their asking, then it is advised to switch the factoring company.

Choosing a random factoring company

Before finalizing a factoring company, owners of a trucking company should do basic research about the options they are considering. Choosing a factoring service without proper research can lead to excessive fees, unfavorable terms and conditions, and potential financial issues for the trucking company. Some basic details that can help one determine if a factoring service is good include-

• How long the company has been in business
• How long it takes to make invoice payments
• What are the usual contract lengths it offers
• How do they deal with complaints and issues

Choosing the wrong type of factoring service

There are two forms of factoring services – recourse factoring and non-recourse factoring. A trucking company owner must be able to determine which type would best suit their business.

• Recourse factoring- Here, if a customer fails to pay for the delivery, the trucking company is held responsible for it. Since most of the risk here falls on the trucking companies, they are charged a much lesser fee by factoring companies.
• Non-recourse factoring– Here, if a customer fails to pay for the delivery, the factoring company bears the loss. Here, the factoring company is at a higher risk, so the trucking companies are charged higher fees for factoring services.

Trucking company owners must be aware of how much risk they are willing to take before choosing a factoring service. If they have strong faith in their clients, opting for recourse factoring and paying a lesser fee can be a wise option for them. However, if they do not have strong trust with their customers or if the trucking company is new in the business, it is advised to choose non-recourse factoring.

Factoring services offer a financial solution for trucking companies looking to boost their cash flow and power through the challenges of late delivery payments. Such services help businesses address short-term financial constraints, meet operational requirements, and seize growth opportunities.