For one reason or another, you’ve had enough of your current invoice factoring company. You may be tired of the increased fees, the monthly rules on how many invoices you must factor with them, or need more services than they offer. Before you agree to switch to another company, make sure you understand how to do a freight factoring buyout.
Research Other Freight Invoice Factoring Companies
Before you do anything, research other freight factoring companies. If you’re going to lose money switching companies, it can be better to wait it out. You may have two more months before your current contract ends. While you’re waiting, take time to research other freight factoring companies. Find answers to these questions.
- Is there an application fee?
- What are the factoring fees, banking fees, and other potential costs of factoring invoices with your service?
- Are the arrangements month-to-month or am I locked into a long contract?
- Can I factor some invoices with you and continue doing my trusted, long-term clients on my own?
- How long does it take to get paid after submitting a bill of lading? Can I get same-day payments?
- What happens if my client doesn’t pay the factoring company? Am I going to become financially responsible for unpaid invoices?
- Are there volume requirements? If I don’t meet the minimum, what happens?
- How are bills of lading submitted? Do you generate invoices that I can upload to my work’s accounting software?
- Does your company offer other perks that can help me grow my business?
Narrow down your choices and choose the company you’d want to switch to. Get together a list of questions you have for the finalists on your list. Ask those questions before making a final decision.
The Steps to a Freight Factoring Buyout
Once you’ve found a company to switch to, how do you start the next steps? Many companies have done this so many times before that they’ll be able to help you each step of the way. But, these are the general steps you’ll be taking.
- Read Over Your Current Contract
Read over your current contract. You’re looking for a few specific things. First, look at the contract agreement. When does the current contract expire? If there are months remaining on your contract, you need to look for the early termination fee. That brings us to the second thing. What is the early termination fee? If you are going to lose hundreds of dollars canceling the contract early, it can be better to wait.
- Fill Out the New Invoice Factorer’s Application
Complete the application for the freight factoring company you’ve decided to switch to. They’ll become an integral part of the change and can help you with many of the upcoming steps. The earlier you get started, the easier the transition can be.
- Forward a Copy of Your Current Agreement to the New Freight Factoring Company
Once you’ve decided you want to switch and know when it can happen, make sure your new factoring company has a copy of your current contract. They’ll enter into discussions with your current company to figure out the buyout offer. Your current company will come up with the number and value of invoices they are handling each month for you. They’ll look at how much of those invoices are paid in advance, and the buyout offer is based on that.
For example, if you get 90% of your invoice value and you have $100,000 in invoices, the buyout offer would be $90,000. Once you have this offer, make sure you agree with the numbers. If you question anything, get it clarified before you sign an agreement.
- Get the Termination Notice
The next step is to get a termination notice. You need the paperwork confirming that your contract with your current freight factoring company has been terminated. You’ll get the effective date and know exactly when the change will take place. You must sign this notice, and so will your current factoring company and the company you’re switching to.
- Your Companies Negotiate the Aging Report Information
An aging report is established. This helps establish which invoices are pending payment. Invoices go into a holding pattern for a few days. This gives time to get everything changed over. If invoices need to be reissued by your new freight factoring company, they’ll take care of it. As you may have clients that pay every 30 days, 60 days, or even 90 days, reissuing invoices can be an important step to ensure payments go to the right place.
- Get a Letter of Release
Make sure you get a copy of the letter of release from your old invoice factoring company. You want this as proof that you’ve ended all business with them and that nothing is outstanding.
- Do You Let Clients Know?
Generally, you don’t have to let your clients know. The factoring company does that on your behalf. You should go in and change things on your new invoices and bills of lading, if needed, to ensure any occurrence of your former freight factoring company is gone. You don’t want to accidentally have a payment go to the wrong place.
- Keep Track of the Money You’re Owed
While freight invoice factoring buyouts are designed to be trouble-free, even a minor mistake may cause stress. Just keep checking the bills of lading you submit and outstanding invoices against what you’re being paid. If there are issues, which is uncommon, reach out as soon as you can. If there are problems, address them quickly to ensure your income doesn’t take a hit while you’re waiting for an issue to be resolved.
Remember that your former freight factoring company is bound by law to forward any payments they get after the switch. You don’t have to worry about them taking your money and keeping it.
Get Lower Fees and Excellent Benefits With Saint John Capital
Saint John Capital works with you to ensure the freight factoring buyout goes smoothly. Make sure you provide us with a copy of your current contract so that we can go over any potential penalties before you sign an agreement. We understand that it can be cost-effective to wait until the contract agreement date ends. Other times, it may save you money to get out of a contract early as you’re losing more money than you should be to hidden fees.
When you switch to our factoring company, we offer a range of services in addition to invoice factoring. We provide same-day payments if you submit paperwork before noon EST and have a Saint John Capital credit card. Our handy app helps you track your drivers’ locations, find new loads to transport, and run business credit checks. We also offer business lines of credit if you’re ready to grow your company.
Our team is happy to discuss your options and help you make the switch. Consult with Saint John Capital’s invoice factoring experts about switching to our money-saving freight factoring services and what the freight factoring buyout process entails given your current agreement.