Choosing the right freight factoring firm may be one of the most crucial financial decisions you will be making for your business. It means that it should not be taken lightly, given that you will be working with a factoring company for a while.
Also, a part of the success of your business depends on your relationship with them.
There are plenty of invoice factoring companies out there. OTR Capital, for example, does not only offer freight factoring services. They also provide fuel advances, back-office support, and more. The additional services offered by invoice factoring firms vary, so it is best to do your research first before deciding which one works for you.
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Here are some questions you need to ask before selecting a specific freight factoring company:
For How Long are They in the Factoring Business?
Although you do not discriminate against new factoring companies, the fact remains that companies operating for years already know the ins and outs of factoring. It means that they can offer you smart and practical tips based on experience.
And since the transportation industry is very fluid and highly competitive, firms with demonstrated longevity are more reliable and knowledgeable. Ideally, choose the ones that have at least five years of experience.
Are They Specialists in Transportation?
Though many factoring firms claim to be transportation specialists, only a few are actual and real specialists. If you work with a new and inexperienced factoring company, you might suffer serious liabilities.
You can check if the company you want to work with is an expert by asking them industry-specific questions. Are they familiar with the leading players in the industry? Are they compliant with the required paperwork to deliver a single load?
Are Fuel Cards Parts of Their Services?
The majority of trucking factoring companies like OTR Capital support fuel card programs. Most of these companies also mix all the fuel purchases among all their clients. They even have cost-plus programs that provide their clients with discounts and must-have features.
If a company does not support a fuel card program, automatically remove it from your list of prospective factoring companies.
Also, check if it offers fuel advances. It is a feature that provides funding every time a client trucking company picks up a load. The fund is used to cover your fuel expenses. For carriers with limited funds, this service is useful.
Do They Support the Financing of Freight Brokers?
It is only applicable if you are a freight broker looking for factoring companies. The majority of freight factoring firms do not finance freight brokers. These companies only provide advance funding for carriers.
Bear in mind that most firms that offer financial support to freight brokers have a 90% maximum cash advance. It is used to pay the carriers of the broker to make sure that a lien cannot be placed against the freight bill.
The primordial reason why brokers and truckers apply for financing is that they run out of cash flow to pay for their operational expenses. While it is true that you have to find help quickly, this does not mean you have to be hasty in choosing.
Choosing the right factoring partner is crucial in the long-term success of your business. Go the extra mile and do thorough research about your prospective partners.
It is better to get it right the first time and enjoy a fruitful business relationship than trying over and over again.