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Factoring Company For Freight Brokers

Updated: Nov 24, 2020

Freight brokers work with factoring companies so that they can focus on growing their freight brokerage, while the factor takes care of their carriers through invoice factoring.

How does factoring provide cash flow for freight brokers?

It is often a common problem among freight brokers to get caught behind on paying carriers due to slow paying shippers. A shipper that takes 30 to 90 days to pay for a load, causes issues for a freight broker's working capital and makes it extremely difficult to stay on top of payments to carriers. This, in turn, hurts the freight brokers credit ratings.

When freight brokers are behind on their working capital it is nearly impossible for them to grow their business, and instead puts them in a downward spiral trying to complete payments to all their carriers on time. Freight broker factoring is a solution to this issue. A factoring program will get fast payments to the broker and carriers for their freight bills, as well as strengthen the relationship between the two.

How does factoring work for freight brokers?

Trucks parked at a load dock to haul a load for a shipper and broker

Factoring, also known as accounts receivable financing, invoice factoring, freight bill factoring, among others, is the process of getting paid quickly for an invoice, instead of waiting the full pay term. The process is similar to trucking factoring due to the fast payments, with some additional steps. The factor purchases the unpaid invoices and advances cash directly to the freight broker. The factoring company then pays the carriers directly under the agreed upon pay terms and waits to collect the payment from the shipper.

These quick payments allow freight brokers to focus on building relationships with their clients, growing their clientele base, and never falling behind on payments, without having to worry about making collections on late shipper payments. Instead, the shipper will pay the factoring company directly.

In addition to the benefit of faster payment terms between brokers and carriers, there are other factoring services offered by most freight factoring companies. One benefit for brokers that work with us is they have access to our entire client base for additional carriers. We also offer a preferred factoring rate on our broker loads for participating carriers to provide additional capacity. All carriers that haul your loads also qualify for our fuel card.

The process of factoring for freight brokers

  1. The shipper and broker agree on a price for a load, if the broker finds a carrier to move it.

  2. The broker then offers a carrier a price to move the load.

  3. The carrier delivers the load and sends the freight broker proof of delivery.

  4. The freight broker then sends the shipper and carrier invoices to the factor, showing how much each party has agreed to be paid on the load.

  5. The factor advances the broker their payment within 24 hours, keeping a small portion in escrow until the shipper pays.

  6. The factor then pays the carrier on scheduled pay terms (21 days for Porter). If the carrier wants their payment faster, they can choose a 24 hour quick pay. This costs the carrier a 3% fee - 1.5% for Porter and 1.5% for the Broker.

  7. The factor then waits for the shipper to pay.

For more information on how we can help you freight brokerage grow, call us today at (205) 397-0934 or apply here.

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