In the world of owner operators, factoring companies provide a crucial service by getting hard-working drivers money for loads as quickly as possible rather than making them wait an extended period of time to get paid. Choosing the right factoring company for you is an important initial step for any trucking company just starting out. As a dispatch service, we have had the unique perspective of working with multiple different factoring services varying from the small to industry leaders. Each has unique advantages and disadvantages depending on what your preferred way of doing business is. Below we will outline for you the different traits to evaluate a factoring company on.
The first and most obvious trait to judge a factoring company on is the percentage they take on each load they factor. This is essentially the cost, or price, of factoring loads. While larger, more-established factoring companies may charge a higher percentage (3.5-4%), they also typically have more stable amenities to offer and/or more robust systems. Smaller factoring companies, on the other hand, usually take less of a percentage each load (2-3%) but don’t exactly have the same benefits to offer.
Some factoring companies are quite picky when it comes to who they will and won’t work with. They will often base this on broker credit history. While credit history can be a good indicator as to whether or not a company is at risk for not paying, a majority of the time it just shuts out freight brokerages simply because they‘re new. Anytime you limit your freight sources your rates can, and usually do, decrease. It is important to make sure the factoring company you choose doesn’t limit your options too much.
Odds are, the larger, more-established the factoring company; the more benefits they offer to their drivers. For example, factoring companies like RTS or SevenOaks can offer drivers access to fuel cards that gets them discounts on fuel at a large number of truck stops around the US. Cost savings like this can occasionally justify paying a higher percentage per load.
Having all of your load rates paid by one entity rather than receiving individual payouts from multiple different brokerages makes tax season less of a burden. Ask any other small business owner, they will tell you this feature alone is worth its weight in gold. It‘s also naturally easier to go back and check the payment statuses of all your loads as they are all in the same system. This makes it harder for older, unpaid loads to fall through the cracks.
Factoring companies of all sizes tend to agree on one thing: keeping their truckers happy is just smart business. After all, if it weren’t for owner operators hauling freight, there would be no money for them to make. Any factoring service worth its salt should know this and emphasize treating you accordingly. We’ve even seen some factoring companies assign truckers with a dedicated customer support agent, allowing the agent to get to know and understand their business from top to bottom.
Staying mindful of these traits when examining potential factoring companies can save you time, stress, and money over the course of your owner operator career. This is an area where you as a driver have leverage as you are the customer. Being selective and conveying your business desires clearly will ultimately lead you to the best service for your business.