One of the most stressful decisions a company can make is finding the right financial partners. Low rates are great, but they’re not ideal if it’s impossible to get help when you need it. You want to start factoring your freight invoices, but you’re not sure how to know who to partner with. How do you know if a freight factoring company is trustworthy?
Key Criteria When Finding a Trustworthy Factoring Company
Before you do anything, these are the key criteria to research as you narrow down your list of possible factoring companies.
- Research, Research, Research
Choosing the best freight factoring company for your needs requires a lot of research. You have to put in the time and energy it takes to find the best factoring company, and that means knowing what you need.
Before starting the research aspect, write out a list of what you’re looking for and rank them. Are the lowest rates your #1 priority or is customer service #1? Are extra features like same-day payments or fuel discounts more important to you than having the lowest rates? You’ll need to have a better understanding of what you need before you start narrowing down the list to your top three freight factoring companies.
- Find Out Who Your Associates Recommend
You likely have associates you trust. Ask them for a recommendation. Find out who they use, what they like and dislike, and how long they’ve been working with that firm. It helps you rule out some businesses and possibly find others who didn’t come up in your initial searches.
- Ask for Proof That They’re Licensed and Insured
Once you have a list of possible freight factorers, you need to start narrowing them down to your top three. If you come across any factoring companies that are not licensed and insured, you could be taking a risk.
If they have services like line-of-credit business loan options and business credit or debit cards, what bank issues those loans and cards? Read up on that bank to see if they’re well-rated.
- Check Your State’s Records
Most state governments allow you to look up complaints against state businesses. See if you can find anything. You can also reach out to the state’s attorney general to see if they can help.
- Look Over the Contract Carefully
Once you’ve chosen the freight factoring company you feel is best suited to your needs, fill out the application. You’ll receive a contract to sign. Don’t sign it. Have your legal team carefully read it over and point out anything problematic.
If you’ve been diligent when researching, you should be well aware of the rates, terms, and conditions, but make sure there are no hidden surprises you’re uncomfortable with. If you have questions, ask them and get answers in writing. If that means having a contract amended, make sure that happens. Check over the amended contract before you sign.
What Should You Be Looking For When Researching?
Those are the things to consider when choosing a factoring company, but what about the in-depth research? What should you carefully weigh?
- Look at the Company’s Reputation
Start by looking at the company’s reputation. The Better Business Bureau is one place to start. One thing to keep in mind is that there are always going to be some complaints. What you want to look closely at is how the business responded to the complaints. Were they closed satisfactorily? Did the company not even bother to respond? If a company ignores the BBB complaint, it’s not a good sign.
You can’t just look at the reviews on the BBB though. Check other sites like Google and Yellow Pages. Again, you’re always going to find negative reviews, so look for how the company responded. You may find the same person spamming negative reviews over and over, sometimes using different names but the same wording or not leaving a typed-out review and only giving a star rating. You need reviews with substance.
- Examine Their Fees and Factoring Rates
Check the company’s fees and factoring rates. Make sure you’re looking for rates that are based on the number of trucks in your fleet. If you have two trucks now but are adding a third as soon as it arrives at the dealer, make that known.
Look into the different fees you might face. For example, will your bank charge a transaction fee? If your broker or shipper never pays, will you have to pay money back or are you entering into a non-recourse agreement? What are other fees you might face?
- Application and set-up fees – A fee to process your application and set up your account
- Business credit checks – A fee charged when a business credit check is performed
- Cancellation fees – Penalties if you cancel your contract early
- Customer service fees – Some companies charge a fee each time you reach out to customer service
- Due diligence fees – A fee paid to secure a slot with a freight factoring company
- Late fees – Fees charged if a broker or shipper doesn’t pay an invoice on or before the due date
- Minimum volume requirement fees – Fees charged if you don’t factor enough invoices in a month
- Processing fees – Fees for processing bills of lading
- Wire transfer fees – Fees for wiring money to your bank or credit union.
- Make Sure They Are Available and Provide Great Customer Service
What are the customer service hours? How do you reach them? Is online chat available or is customer service only available by phone? Can you email the customer service team? If you can do things like email support or live chat help, what’s the average wait time for a response?
If you’re in that area, is there a physical office you can go to? All of this can help you understand whether a company’s customer service team is right for your needs. If you don’t have time to sit on a phone and wait on hold, email support is ideal.
What about the languages the customer service professionals offer? If you are more comfortable talking in a language other than English, is that possible? A refugee from the Ukraine may know some English, but it’s easier to talk in Ukrainian. You should be able to get help in the language that’s easiest for you.
Look at the Company’s Experience
Experience counts for a lot. While a brand-new company may be completely trustworthy and reliable, it’s a gamble. You won’t have a record of their successful service. It’s estimated that almost 21% of new businesses fail within 12 months. Almost half fail within the first five years.
The last thing you want is to partner with a freight factoring agency that fails within a year. You’ll be stressed and rushed to find a new arrangement. Plus, there’s the chance that you’ll take a financial hit. Always weigh the company’s history and experience.
Saint John Capital has more than 20 years of experience in the freight factoring industry. The first financial transaction with our company dates all the way back to 1997. We’ve helped thousands of companies get paid early, grow their businesses, and enjoy the stress-free ease of finding loads, tracking loads, and running free business credit checks.
Give us a call. Our freight specialists speak over a half-dozen languages, so we’re happy to help you, even if you struggle with English. We’re here to help.