Gas prices are soaring, which has a tremendous impact on trucking companies across the U.S. For many small fleet owners and owner-operators, freight factoring is key to managing their business and ensuring a steady cash flow.
In theory, freight factoring is simple. Deliver a load, submit the payment request and paperwork, and get paid as soon as later that afternoon.
It may seem simple, but some trucking company owners unknowingly make mistakes that delay the arrival of funds. Instead of receiving the fast payment they expected, they get stuck in “pending.” Those pending funds make it hard to cover fuel costs, take on more work, and keep up with regular expenses like payroll and truck maintenance.
Our guide covers the most common factoring mistakes that slow down funding and how to avoid them.
Document Errors and Poor-Quality Scans
One of the most common causes of a delayed approval is unreadable documents. If the freight factor cannot make out the numbers and wording on the documents you submit, you’re going to find your request stuck in pending while you resubmit documents. Double-check the quality of your scans and images before you send them.
Verify that all the information is present. If anything is missing, it becomes a problem that triggers a denial or manual review.
Some of the most common problems with images and documents are:
- Incorrect Rate Confirmation: Your invoice is for $2,000, but the rate confirmation shows $1,800. It comes down to a lumper fee and tolls that you forgot to document. Your payment becomes delayed while the situation is resolved.
- Missing Information or Signatures – If a bill of lading lacks a signature or the delivery date and time are missing, it may result in rejections or manual reviews.
- Shadows – Taking a picture with a phone is easy, but if you’re in a shady location or positioned between a light source and the receipt or document, a shadow can make the text hard to read or signatures hard to see. In this case, a manual review of the document is necessary.
Failing to Check a Client’s Creditworthiness
Factoring is a form of credit-based financing, but it’s based on your client’s credit rather than yours. Because it’s credit-based, freight factoring companies maintain a list of “approved” brokers and shippers. If you work for a client who isn’t on that approved list, you’re on your own.
You’ve hauled a load for a broker or shipper without ever checking their credit report. After the fact, you learn they have a long history of late payments. A factoring company won’t accept your payment request. You’ll have to invoice the client and hope you get paid eventually, putting you back in the waiting game you were hoping to avoid.
If you’re carefully checking the business’s payment history, you may be able to gauge when a company is struggling financially. It’s worthwhile to look closely at a company’s history before you work for them.
Accepting Payment After a Notice of Assignment
When you enter a freight factoring contract, the factor sends a “Notice of Assignment” to the clients you’re going to send to the factor for immediate payment. This document tells them they must now pay the factor instead of your factoring company.
You’re working with a new company and forgot to make sure the client received the NOA. You mistakenly received the payment that should have gone to the factor. You now have misdirected funds and must correct that or risk a breach of contract.
Forgetting to Document Proof of All Additional Fees
Keep careful records of any additional fees, such as detention time, lumper fees, and tolls, as brokers and shippers tend to dispute those charges on an invoice. You must have dated and timed recipes and emails proving that the charges were allowed. Don’t rely on a verbal agreement.
If a broker or shipper disputes the charge, you’ll find that some of your funds are held until the dispute is resolved, which could take months.
Accepting a Double-Brokered Load
There’s a rash of double-brokering scams throughout the U.S., where one broker steals a load from a legitimate company. You accept the job without carefully researching the offer and verifying the broker’s contact information and MC number with the FMCSA.
When the factor goes to verify the company, they discover the double-broker scam. You’re out the money.
Submitting a Payment Request After the Cut-Off Time
Banks aren’t open 24/7. There are cut-off times for any payment request. If the factoring company has a 2 p.m. cut-off time and you miss it, you’re waiting another business day.
Strict adherence to cut-off times is especially important if you’re expecting a same-day payment. The cut-off time at Saint John Capital is noon EST. On a Friday, a late payment request could leave you without a payment you were expecting until Monday.
Misunderstanding What Non-Recourse Means
When you set up freight factoring, you have a choice between recourse and non-recourse arrangements. Sometimes, trucking company owners misunderstand what non-recourse arrangements protect them from.
Non-recourse agreements do protect you from non-payment in certain situations. It isn’t a blanket guarantee. This is perhaps the most expensive mistake a trucking owner can make. Many owners choose “Non-Recourse” factoring because they believe it protects them from all non-payment. It doesn’t.
These agreements protect against bankruptcy or sudden closures. It doesn’t protect you from a client who doesn’t pay due to a dispute, a paperwork error, or damage. If you delivered a load hours after the deadline,
Carefully read the contract to ensure you understand your obligations. If your client doesn’t pay, what situations protect you from a chargeback by the freight factoring company?
Saint John Capital’s Checklist for Fast Payments
- Run a Credit Check – Make sure the client isn’t a risk before you accept the job. Even if you’ve done the work, you should still check that there are no issues with payments that might lead to a denial of your payment request.
- Verify the Rate – As you complete your payment request, check that you have entered the factoring rate, advance rate, and any fees correctly to ensure your request passes the first time.
- Ensure the BOL Is Error-Free – Go over the bill of lading to make sure it’s signed, dated, and includes all pertinent information. Proof of pick-up or delivery is essential for fast payment.
- Attach All Necessary Receipts – Include all required receipts, including lumper fees and tolls. Get a High-Resolution Scan – Keep unreadable documents from triggering an automatic rejection.
- Double-Check Your Request – Whether you’re using the freight factor’s app or website, double-check your request before submitting it to ensure you’ve included all necessary attachments, entered figures correctly, and attached the correct documents for that client.
- Submit Before Noon EST – Same-day payments must be received by noon EST. If you submit them late, you’ll wait until the next banking day.
Not every factoring company provides same-day payments. Saint John Capital does. Plus, we offer 100% advances. We don’t make you wait for the remaining 5%, 10%, or 20%. You get the full amount, minus fees, as soon as your request clears.
Get a free quote instantly and discover how affordable same-day payments can be. Have the money you need to keep your trucks fueled and ready to hit the road.
