Factoring, quick pay, or just waiting

What each one is

• Waiting. You invoice the broker and they pay on their terms - usually Net 30, sometimes 45. Costs nothing but time.
• Quick pay. The broker pays their own invoice early for a discount. Arranged with that broker, usually load by load, often offered right on the rate confirmation.
• Factoring. You sell the invoice to a factoring company. They pay you most of it within a day or so, then collect the full amount from the broker. Normally a contract covering all your invoices, not one load.

What each one costs on a $2,000 load

Factoring fees are commonly quoted between about 1.5% and 5%, with one-truck carriers at the higher end and larger fleets lower. Quick pay discounts vary by broker and by how fast you want it. Use your own numbers - these are illustrations, not quotes.

The figure that actually matters is the annual one. A truck grossing $18,000 a month at a 3% factoring fee pays $6,480 a year to be paid three weeks earlier. That is a truck payment. It can still be the right call - but it should be a decision you make on purpose, once a year, not a contract you signed in your first month and never looked at again.

Factoring: the fine print that matters

• Recourse or non-recourse. Recourse means a broker who never pays becomes your problem again - the factor charges the invoice back to you. Non-recourse costs more and usually only covers the broker going insolvent, not a broker who simply disputes the load. Read what is actually covered.
• The advance rate. "95% advance" means you get 95% now and the rest, minus the fee, when the broker pays. Compare the fee and the advance together, not separately.
• All-in or per-invoice extras. Ask about wire fees, ACH fees, same-day fees, monthly minimums, credit-check fees and the fuel card tie-in.
• The term and the exit. How long is the contract, what notice do you have to give, and is there a termination fee? This is where carriers get stuck.
• Who talks to your broker. The factor will. They send the notice of assignment and they chase payment, which is fine - but their collections manner becomes your reputation.

Quick pay: load by load

Quick pay's advantage is that it is optional every single time. Take it on the load that has to cover Friday's fuel; skip it on the one that does not. There is no contract, no notice of assignment, and no monthly minimum.

Its disadvantage is that it is per broker, so it only helps with brokers who offer it, and the discount is often worse than a factoring rate. Check the rate con - the quick pay option and its percentage are usually printed on it.

Waiting: the cheapest option you have to earn

Waiting costs nothing, and it is where most carriers want to end up. Getting there is a cash-reserve problem: you need enough in the account to cover roughly six weeks of fuel, insurance and the truck payment without the money from last week's loads.

Many carriers get there by factoring at the start and then stepping down - factoring only the slow-paying brokers, then dropping it entirely. If you are factoring everything today, the useful question is: what would have to be true for me to stop?

The free day you are probably throwing away

Before paying anyone a percentage, take the days that cost nothing. The clock does not start when the load delivers - it starts when the broker has a complete, correct invoice in hand.

• Invoice the same day it delivers, not on the weekend.
• Send the rate con and signed POD in the same packet, so nothing bounces back.
• Bill accessorials as their own lines, with approval attached - see billing detention.
• Know your terms and chase on the due date, not a month after it.

Carriers routinely lose four to seven days to paperwork and then pay 3% to buy three weeks back. Fix the free part first; it costs nothing and it also makes factoring cheaper, because factors price on how clean your invoices are.

This is general information for carriers, not financial advice. Factoring contracts are binding commercial agreements - have yours read properly before you sign it.