Categories of Factoring: Notification vs. Non-Notification Factoring

Categories of Factoring: Notification vs. Non-Notification Factoring

Notification occurs when a factoring company notifies a client’s customers (debtors) that their payments for the services provided by the client should be paid to your factor. Freight factoring has become a common cash flow strategy within the trucking industry. Customers’ accounts payable departments are likely dealing with factoring companies all the time and are well versed with the practice.

Customers’ accounts payable departments are likely dealing with factoring companies all the time and are well versed with the practice.

Non-Notification factoring is entirely different in that the customer is not notified, nor made aware that the client is factoring invoices. Instead all paperwork and communication conducted by the factor with the customers are made as if it were coming from the client. Decades ago, this was used as a means of disguising the fact that carriers were factoring their invoices. Today, freight factoring is common practice and well accepted throughout the industry. This form of factoring is rarely used by contemporary transportation companies as it is a higher priced option and a less efficient process.

freight factoring form: notice of assignment 
Figure 1-2:  Sample Notice of Assignment Letter to Customers


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