Step by step
- You deliver the load and get the signed POD.
- You send the factoring company the invoice with the rate con and the POD, sometimes the BOL too.
- It checks the paperwork and the broker, then advances you most of the invoice, often within a day.
- The broker pays the factoring company on its usual terms, often 30 days or more.
- The factoring company pays you the rest of the invoice, minus its fee.
What it costs
Fees are a percentage of each invoice, commonly a few percent, and can be flat or grow the longer the broker takes to pay. Read the contract for the rest: minimum volume, monthly fees, fees for fuel advances or same day pay, and how long you are tied in.
Recourse or non recourse
| Recourse | Non recourse | |
|---|---|---|
| If the broker never pays | You buy the invoice back | The factoring company usually takes the loss |
| Fee | Lower | Higher |
| Read closely | How many days before it comes back to you | Which non payments are covered: often only the broker going out of business, not a dispute |
The notice of assignment, and switching
The factoring company sends each broker a notice of assignment telling it to pay the factor, not you. To leave, you need a letter of release from the old factor so brokers pay you or the new one. Ask how release works before you sign.
Factoring or quick pay
Many brokers offer quick pay for a fee. It works load by load with no contract, but only with brokers who offer it. Factoring covers every broker and adds credit checks on them, for a fee and a contract. Whichever you use, the fastest money comes from invoicing the day the POD is in.