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COACHES CORNER: Truckload Factoring

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A freight factoring company is a financial third party that provides funding to a carrier at a discount to the actual receivable owed to the carrier by the shipper or broker. Freight factoring typically comes with two options. The first is when the factoring company takes most of the ownership of the carrier receivable and bears the responsibility to collect. This is referred to as non-recourse factoring. In this case, the factoring company will take a higher discount due to the collection risk. This type of factoring does not leave the carrier without risk depending on the shipper’s credit history and debt rating. The second path is when the carrier still bears the risk of collecting the shipper or broker receivable but needs to speed up cash flow for expenses. This type of factoring is referred to as recourse. Factoring companies play a role in a carrier or broker’s financial stability by providing cash flow for operating expenses and minimizing resources chasing past due payments. In some cases, the factoring company acts as the accounting arm for small carriers providing web access to view financial and expense reports. Invoice funding is typically set up to be the next day upon completion of the delivery and proper submission of the funding application. Most factoring companies prefer to have funding set up by account versus on a one-by-one basis. The standard factoring fee is 3% up to 6% with some cases reaching 10%.

For the shipper side, there are a few things to be aware of. The first is factoring is also utilized by brokers. Be aware of this if you are using brokers that factor. To identify carriers and brokers using a factoring company, a quick review of your freight invoices will illustrate the third-party bill to associated with a carrier or broker. The third-party shown may be the factoring company. In the case of the broker’s factoring, this may be a sign the broker’s financial strength is not what it needs to be. Secondly, extended credit terms have an impact on your freight cost. Cost can come in two forms. First, smaller carriers accepting loads knowing their factoring expense is taking 2-5% of their revenue. Additionally, smaller and midsize carriers may not be able to participate in a shipper’s carrier solution due to the extended payment terms leaving the shipper with fewer routing options and less competitive rates.

To add more robust routing options, shippers may partner with a preferred broker that offers a next-day quick pay program and rate transparency. Essentially allows smaller carriers an avenue to remain cash positive and earn a higher yield per load with the shipper through a reduced next-day quick-pay fee. The benefit to the shipper is twofold. Carrier retention becomes strengthened and mitigates market capacity rate fluctuations while also maintaining one accounting channel internally as the broker manages multiple smaller carriers on behalf of the shipper’s network. Rockfarm’s non-asset division still sees as high as 50% of the invoicing activity going to factoring companies while 5% to 10% of the invoices are paid through our next-day quick pay services.

For more information regarding Rockfarm’s quick pay program and our enablement of your carrier solution please reach out to Brad Stewart at brad.stewart@rockfarm.com or contact us online!


Brad Stewart, President

By Brad Stewart

Co-Founder, CCO

Brad’s journey into logistics began as a Marine Officer and transitioned from the LTL docks to the non-asset side within the logistics service provider arena.  As a co-founder of Rockfarm, Brad drives our business development efforts and delivery of our promise. An Arizona native, Brad enjoys spending time outdoors in his home state with his wife and family.

“Our approach to the market allowed us an opportunity to push forward in 2008 and enable our mission, “lower the cost to serve” to stand as a cornerstone to our company today.”














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