When you're a small player in the transportation game, managing your cash flow can be quite the puzzle. However, a solid factoring plan can make a difference by providing you with the working capital you need when the market gets tough. Now, the real question is, how do you figure out which is the best deal for you in this industry? Well, that's where the art of asking the right questions comes in.
When you're on the phone with a factoring company, whether you dialed them up or they dialed you, ask the rep on the line the following questions to get a comprehensive understanding of how freight factoring can benefit your business and whether the company's specific proposal answers effectively to your needs.
1. What's the lowdown on the terms and rates?
Understanding the terms and rates involved in the factoring agreement is crucial. Be sure to ask about the discount rate on invoices, any additional fees, and other one-time or recurring payments. Ask for any hidden terms or conditions in the contract that may play the long game with your business. This includes finding out if you must hit any minimum targets – be it load volume or contract time. Also, drill down on the steps for getting your first funding and breaking up if things don't work out. Don't forget to check out if there is a way to get a better rate, extra services such as free TMS, load boards, dispatching, or insurance, and also if they have alliances to obtain additional discounts.
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One more thing! Check if they can offer you a competitive Fuel Card. Ask about the average savings, the station coverage, and expense control mechanisms. Ask what makes it better than the other options out there. And see if there's a special factoring rate if you use their card. |
2. How fast can I cash in on my invoices?
For small carriers on the road, keeping that cash flow steady is essential to cover operating expenses and achieve business growth. So, pop in the question on how fast they can process your invoices and deliver your funds. Understanding the timeline will help you plan your finances more efficiently and make informed decisions about your business operations.
Keep in mind that the promised times are often based on deliveries made without any inconveniences. So, dive deep and ask what happens when a load has a problem, how long those payments take, and how they keep you in the loop. Get the 411 on their working hours, what services they do and do not provide during extended hours, and if they work on Saturdays and holidays. And last but not least, ask them about the payment methods – be sure about where and how you'll get your money.
3. What is customer support like?
When engaging with a freight factoring company, a trustworthy customer support team serves as your anchor, providing stability and reassurance when the industry is in turmoil. So, be sure to ask about the quality of their customer service – how fast they pick up the phone, how easy it is to reach them, and whether you will have a personal account executive. Will other people from the company drop you a line? When and for what? Can you summon the supervisors if you ever need them? Does anyone speak Spanish, or do they only provide customer service in English?
Consider your working style and ask what you need to know if the company can adapt to your business. Be clear on the communication channels you want – face-to-face treatment or virtual, through emails, calls, messaging apps, or even carrier pigeons. Also, clearly define the type of system you need, and determine whether you need an automated system to efficiently manage your loads or if you prefer one with human support.
4. What's the deal with chargebacks?
You probably already know but, in freight factoring, there are two types – with and without recourse.
With recourse, you're responsible if invoices go rogue, and if they aren’t paid by the client, you may have chargebacks or additional penalties. But that usually means a lower rate.
On the other hand, without recourse means the factor takes the heat if your client doesn’t pay, under specific circumstances. Some companies will cover more cases, while others will only do basic coverage. The only way to gain a deeper understanding at this point is to dive deep into examples, for the reps to answer when the factoring service would cover and when it wouldn't.
Some possible scenarios to consider are: what happens if the broker goes bankrupt, closes the shop without the bankruptcy drama, or there are hiccups in delivery or damages not on your watch? What if it's your bad? And don't forget to check how far their coverage goes – like, what if the broker pays after 91 days or more?
Integrating concrete examples can help clarify the limits and coverage conditions of the factor. Likewise, understanding the legal and financial implications of these conditions will help you evaluate the risks associated with your freight factoring prospects and make informed decisions for your business.
5. Why should I pick you out of the crowd?
End the conversation with a bang – this question will allow them to articulate key aspects that differentiate their company from others, and you will have the opportunity to determine if their business culture aligns with yours.
Do they focus on top-notch customer service and carrier satisfaction or tech that could streamline your operations and improve efficiency? Evaluate their response and see if their values, services, and tech match your priorities. After all, it’s crucial to establish a strong long-lasting partnership.
So, there you have it! When diving into the world of freight factoring for your small carrier business, throw these questions into the mix. Ask what’s needed to completely grasp the terms, the speed of delivery of funds, and the reliability of the service provider. By doing so, you can make an informed decision that aligns with your business goals and improves your financial stability.
And hey, here at Summar we are ready to answer all your questions on our services of Freight Factoring. Fancy a chat?
Give Summar a try!
At Summar Financial, we have worked with small carriers for over 19 years and understand that managing cash flow can be a constant challenge. For this reason, we offer you solid financial solutions tailored to your company, guaranteeing you access to working capital when you need it most. We have non-recourse factoring options with a credit guarantee, a fast payment process, and a dedicated customer support team, and are constantly developing complementary services to help you on the road. Take advantage of our extensive industry knowledge and improve the financial stability of your business.
Put us to the test!
We are ready to answer all these questions and more.