Factoring Loads: Everything You Need to Know

If you’re interested in learning more about freight factoring, let DAT be your source! Let’s break down everything you need to know in this introductory guide to freight factoring. By the end, you’ll be better positioned to determine which – if any – factoring solutions make the most sense for your business.

What is freight factoring?

Load factoring – sometimes referred to as freight factoring, freight invoice factoring, trucking factoring, or transportation factoring – can be a boon to a carrier or owner-operator’s business. Factoring allows carriers to:

• Expedite payments for invoices and account receivables resulting in fast and reliable cashflow for your business.
• Eliminate cash flow uncertainty, smoothen out extreme end of the business cycle, and avoid taking on new debt.
• Pass off billing, invoice collection, and processing to a dedicated support team.

In many cases, it can take invoices weeks, if not months, to process. With freight factoring, you get paid within 24 hours of submitting your invoice. This makes it easier to regulate your finances, as well as focus on the most important part of your business — getting on the road and hauling loads.

What does the factoring process look like?

Against a backdrop of persistent economic uncertainty and supply chain volatility, it’s easy to see why freight factoring is becoming an increasingly popular tactic for carriers seeking cash flow certainty. The best factoring companies for truckers provide carriers with immediate financial relief and round-the-clock back-office support. Reputable freight factoring companies, like DAT’s partner OTR Solutions, specialize in fast funding in addition to efficiently collecting, handling, and processing invoices.

Carriers not only avoid the stress surrounding load payments but save tremendous time by passing off invoice-related back-office duties to established freight factoring companies. By letting expert factoring invoice companies like OTR Solutions handle your back-office invoice work, you can start to focus more on core areas of your business and maximize your time spent on the road.

Rather than waiting between 30 to 90 days to receive payment, carriers can elect to submit invoices to proven freight factoring companies like OTR and get paid quickly – typically within less than 24 hours. If you decide to factor, the factoring company – in this case OTR – will purchase your invoice from you at its full market price, subtracting only a small percentage fee from your gross margin.

The two most common types of factoring solutions are recourse and non-recourse factoring – the differences of which we get into. For now, one of the best parts about non-recourse factoring you should know is that once you sell your invoice at a slight discount to the factoring company, with non-recourse factoring, you’re no longer responsible for the customer’s payment.

From a dollars and cents standpoint, you can see why the choice to factor is a best practice for a majority of carriers. Just think: would you rather receive a guaranteed payment within 24 hours or hold out a further two to three months for that extra 2% to 3% you’d save on fees? Not to mention the time spent keeping track of outstanding invoice and depositing payment in your account. In most cases, by saving time on back-office duties, fleets make up the difference in no time, especially with factoring experts like OTR handling all invoice-related matters.

What are the differences between recourse and non-recourse freight factoring?

There are two primary types of factoring: recourse and non-recourse factoring – before you rush into any decision, it’s important to understand the key differences between the two.

Recourse freight factoring: Recourse factoring services typically charge a lower percentage of the total load payment. This may seem tempting on the surface – after all, a lower cut for factoring companies means recourse factoring theoretically puts more money in your pocket.

But it’s not for everyone.

With recourse factoring, you’re on the hook if the factoring company fails to collect the full invoice payment from your customer. In the event that a factoring company is unable to receive proper payment, recourse factoring requires that you, the carrier, must buy back the invoice. This can prove problematic for carriers who aren’t prepared to take on this liability and those looking to keep their cash flow consistent and regulated. As a result, carriers opting to recourse factor their loads are often larger operations who have the financial stability to accept losses from less credit worthy customers who do not pay on invoices.

Non-recourse freight factoring: Now that you know recourse factoring – you’ll appreciate the appeal of transportation factoring companies that offer non-recourse factoring services. The most important distinction is that non-recourse freight factoring removes the carrier’s liability in the event of customer non-payment. With non-recourse factoring, you don’t have to repay the load invoice if your factoring company fails to receive its due invoice payment from your customer.

So, why wouldn’t every carrier that decides to factor load invoices go the non-recourse route? Well, because non-recourse factoring also comes with a slight caveat of its own. Compared to recourse factoring, non-recourse factoring companies evaluate broker’s credit scores and ability to repay the invoice in a reasonable amount of time. In exchange for taking on the majority of the collection risk, non-recourse factoring companies usually take a slightly bigger cut of the total load payment as their fee.

Some carriers prefer to take their chances and give up a slightly smaller percentage of the pie. But many carriers and owner operators are happy to sacrifice a little bit more off the top if it means guaranteed invoice payments.

Bottom line? Determining the most suitable type of factoring solution for your fleet will ultimately boil down to your business’ specific operational needs.

What are the benefits of factoring?

If you’re a carrier or owner-operator and ever find yourself waiting weeks, if not months, to get paid for your hauling services, you’ve probably witnessed the very real business costs of slow invoicing first-hand. Freight factoring isn’t just about ensuring timely payments — it’s about fortifying your customer relationships and establishing yourself as a reliable business partner. It also helps your credit score, demonstrates your trustworthiness to brokers and shippers, and helps you find financial peace of mind for your trucking business.

That’s exactly why DAT has partnered with OTR Solutions to bring non-recourse freight factoring to the largest carrier marketplace in North America. OTR’s dedicated customer service team remains on standby – ready to support you and your fleet at all times.

• • Minimize back-office burden
    When you pass off all of the busy back-office work involved with account receivables and invoice processing, you’re able to get back on the road and find your next load that much quicker.

• • Eliminate cash flow uncertainties
    By receiving invoice payments within 24 hours, factoring provides the cash injections you need to maintain sufficient working capital and avoid payroll problems. The cherry on top? When you factor your freight invoices, you never incur any debt or future interest obligations.

• • Delight your customers
    Let’s face it: sometimes your biggest, best, and longest-standing customers run into operational challenges themselves. The beauty of non-recourse freight factoring is that everybody wins – regardless of the circumstances. Instead of prodding some of your best customers for payment – and potentially putting your broader customer relationships at risk – with factoring you can keep your business firing on all cylinders and ensure your customers stay highly satisfied.
• • Scale with ease and efficiency
    For a small fee, the best factoring solutions will usually guarantee your payments on the front end and save you time on the back end. Savvy carriers and owner-operators looking to optimize their fleet-wide uptime can do so by working with leading factoring companies like OTR to take on all invoice-related duties. When you give your back-office duties to the pros, your business unlocks a whole new world of growth possibilities.

What makes for a good factoring company?

The best transportation factoring companies go beyond simple invoice collection and processing. In addition to expediting invoice payment, industry-leading factoring companies like OTR Solutions also offer vital back-office support and an array of other customizable services to carriers nationwide.

Carriers trust OTR because their factoring solutions are designed by experienced freight experts and cater to fleets of all shapes and sizes. OTR’s factoring services move the needle for carriers regardless of where they might be in their growth cycles.

OTR is driven to deliver rapid payments for each new factorable load, providing you with the critical operational cash flow you need to prosper. Carriers that go with OTR for their freight factoring needs benefit from OTR’s responsive customer service and steadfast commitment to customer success.

While factoring fees vary from company to company, transportation factoring charges will typically be calculated as a gross percentage – usually between 2% to 3% – of a load’s invoice.

OTR stands out from other factoring companies. While a majority of factoring companies tack on additional invisible fees as a way to market a lower face value rate, with OTR, you know exactly what you’re getting, including:

• No monthly minimums
• No hidden fees
• No delays
• No new debts
• No volume limits
• No credit restrictions/limitations
• No long-term contracts

Take advantage of OTR’s factoring services with DAT

Carriers can tap into DAT’s powerful freight network – straight from the DAT One mobile app – to capitalize on OTR’s transparent pricing and customizable invoice factoring solutions. By taking advantage of OTR’s trusted freight solutions, carriers can say goodbye to the stress surrounding cash flow uncertainty.

DAT earned its reputation by listening to our customers. That’s how we’ve built the most robust on-demand super database in the industry. So when our members came to us looking for factoring solutions that could help them operate more efficiently and effectively DAT set out to partner with the best factoring company around, OTR Solutions.

By joining forces, DAT members can access OTR’s business-critical factoring services directly through their DAT load board subscription. Wherever you are – whenever you’re on the go – you can seamlessly tap into OTR’s factoring solutions right from the ease of the DAT One mobile app.

With more than 668,000 posted each business day, DAT has built the most comprehensive freight network in the industry. With full visibility into factorable loads, carriers can also be approved for advanced funding on factorable loads. Now, by teaming up with OTR, DAT members can easily identify any new load that is factorable — every new load posted on DAT contains a blue check mark if it is eligible for factoring or advance funding.

As the leading end-to-end freight marketplace, DAT One has emerged as the premier hub that meets all carriers’ freight needs – including factoring. By simply logging into DAT’s intuitive interface, carriers can smoothen out the business cycle and stay a step of the competition.

In addition to factoring services, DAT One also features comprehensive broker checks so you can effectively qualify new partners in advance and build your business with confidence. With our joint offering, you can leverage DAT’s advanced market insights, win lucrative new loads on DAT’s load board, and tap into OTR’s factoring solutions and back-office support.

Start factoring today!

Sick of waiting to get paid for the work you already completed? Freight factoring from DAT’s trusted partner OTR Solutions lets you get the value of your invoices fast so you can focus on the road ahead. Try it for yourself today!