Is Your Freight Factoring Company Transparent?
Transparency is critical when working with a factoring company, there should be no secrets and no surprises. The two most important areas of transparency are process and pricing.
A good factoring company will keep communication open throughout the factoring process. The client should always be notified if their funding has been placed on hold or if their invoices could not be verified. There should be no surprises.
When it comes to pricing, transparency is of the utmost importance. A good factoring company will make sure their client understands everything as it relates to the cost of factoring. Unfortunately, not all factoring companies are upfront regarding costs. There are a few practices that businesses need to look out for when judging the honesty of a factor’s pricing.
It is not unheard of for a factoring company to quote a low rate, then neglect to mention the many fees that are then added on. Always be cautious when offered an exceptionally low rate. After all fees are accounted for, the rate could end up being double or triple. If the rate sounds too good to be true, it likely is.
Another practice to look out for is factoring companies that charge a low monthly rate, but then charge for two months when the invoice is paid in a month and one day. Additionally, some factoring companies require monthly minimum factoring volumes. In this case the client will be paying for financing even if they don’t need it.
Hidden penalties are yet another practice to be aware of. The client should always know what triggers these penalties so they can avoid them. If the penalties seem unfair, look for a different factoring company. After a while, a trucking business will get a sense of what fair terms look like.
Copyright 2019, Accutrac Capital Solutions Inc.