Tag: freight factoring

6 Best Ways to Check Freight Broker Credit and Reputation
Not sure how to choose the right freight broker? Or wondering if you really need to run a broker credit check once you find a freight broker you want to work with?

Simply put, the broker you choose to work with can make or break your experience. Although it’s tough to get in with top freight brokers because they prefer to work with carriers they know and trust already, becoming established with one or more will help you streamline your work and ensure timely payment.

This article will explore how to check freight broker credit scores, reputations, and freight broker authority, how to compare freight brokers, and how to choose the best freight broker to work with.

How to Conduct a Comprehensive Freight Broker Credit Check and Review Credit Scores

Conducting a comprehensive credit check on a freight broker is crucial to ensure your business interactions are secure and financially sound. Start by requesting a copy of their credit report from reputable credit bureaus. This report should provide a detailed business credit score, which reflects the broker’s ability to pay on time. A good credit score, typically above 70, indicates financial stability and reliability. Additionally, it’s important to check for any history of not paying carriers on time or a history of paying in full, as these are critical indicators of a broker’s financial health.

When examining the credit report, pay attention to the broker’s cash flow and overall financial health. These aspects are especially important in the transportation industry, where timely payments are crucial. Also, consider conducting regular credit checks, as a broker’s financial situation can change, impacting their creditworthiness. By ensuring that the freight broker maintains a good credit score and has a reliable financial history, you set your business up for success, minimizing the risk associated with working with a broker who may have low credit or a history of financial instability.

1. Conduct a Broker Credit Check Through a Third Party

A formal credit check will show you the broker’s payment history and help you determine whether the freight broker you are considering working with is a credit risk or not. When checking a freight broker’s credit score, pay special attention to how long it typically takes the broker to pay and whether they’ve defaulted on payment. Although the credit check will show several years back, the recent history typically matters most. For example, you may notice slow payments five years ago. If all recent payments are made in a timely manner, it may signify the broker has recently become more stable.

If you’re working with a freight factoring company, they’ll usually take care of this step for you. Factoring companies will even help you identify how much work you can accept from each broker without taking on any unnecessary risk. For example, you might learn that it’s better not to accept more than $50,000 of work from one broker but discover another can likely make good on up to $500,000 in payments.

2. Check Freight Broker Authority to Ensure the Freight Broker is Licensed

Freight broker authority is the permission granted by the government that allows brokers to facilitate the load deliveries between shippers and carriers. The Federal Motor Carrier Safety Administration (FMCSA) grants this authority. Brokers are required to be licensed if they’re engaging in interstate commerce. Because of this, accepting work from an unlicensed broker is risky. Instead, use the FMCSA Licensing and Insurance search (also known as the FMCSA Broker Authority Search) to confirm the broker you want to work with is licensed. Having the broker MC number before you search is helpful, but you can get started with as little as the broker’s name and state.

Be aware that the search will return multiple business types, so ensure the entity type and operating status state that it’s an active broker. It’s also worth noting that it’s possible to be a broker owner-operator. Brokers can be carriers too, but they cannot double-broker their cargo.

3. Check Insurance and Bonding Details

Licensed brokers are required to have a $75,000 surety bond, known as a BMC-84 Bond. That way, if the broker does not make good on their payment obligations, the carrier owed money can make a claim against the bond and still get paid. The broker is then liable for repaying the bond company.

Insurance is also vital. Not only is it legally required, but their insurance will be leveraged if something unfortunate happens on the road.

In addition to being required by law, insurance and bonding demonstrate professionalism and help protect you as well. Look for these details when you run your FMCSA search.

4. Explore the Freight Broker’s Industry Certifications and Training

In most cases, freight brokers are not required to undergo any additional training. That means anyone who can get licensed, insured, and bonded can be a broker. Find out if the broker you want to work with has taken the initiative to expand their knowledge through additional certifications and training.

5. Ask Other Truckers and Carriers About the Freight Broker’s Reputation

It is always a good practice to check a broker’s online reputation and to ask around to see what other companies’ experiences have been with the broker in question. If you have contacts in the freight industry, ask for word-of-mouth recommendations. You can also search online for information and company reviews. Think beyond traditional “freight brokers near me” searches. For example, load boards will often have broker profiles or forums in which people discuss their personal experiences with different brokers. You might find mentions of brokers on review sites or with the Better Business Bureau. Check locally and the state in which the broker is headquartered.

6. Ask the Freight Broker for Information

Touch base with the broker anytime you can’t confirm the details outlined above and find out where you can get the information. You may also want to ask questions related to:
- How long the broker has been in business.
- What experience the broker had prior to opening the business.
- If they have references they can put you in touch with.
- How the broker plans to pay you.
A reputable freight broker will be happy to supply you with whatever information you need. However, if you feel like you’re getting the runaround or the information you’re receiving doesn’t add up, it may be best to forego the opportunity. Partnering with an unlicensed or unreputable broker can leave you without your hard-earned pay and potentially legally liable for any issues that occur.

Key Questions to Verify a Freight Broker’s Creditworthiness and Reduce Risk

To accurately assess a freight broker’s creditworthiness, it’s important to ask pointed questions that reveal their financial practices and stability. Inquire about their business credit score, which is a direct indicator of their financial health and their regularity in paying bills on time. Ask for a recent business credit report to verify this information independently.

Questions should also target the broker’s practices regarding their payment terms and history. For instance, how often do they conduct a credit check on themselves? What is their policy on maintaining a good credit score? Do they have a history of paying carriers on time, or have there been instances of delayed payments? Such inquiries can help you gauge the broker’s financial reliability and their commitment to upholding good business practices. Understanding these aspects is critical for forming a lasting and profitable business relationship in the freight and transportation industry.

Streamline Your Broker Checks with Freight Factoring

Freight factoring companies have grown in popularity because they accelerate payment for carriers. As soon as a load is delivered, a factoring company can advance the payment to the carrier and wait for payment from the broker. Some freight factoring companies also offer services like fuel cards to help their clients save cash too.

Because the broker ultimately pays the balance, freight factoring companies can work with carriers of all sizes—even owner/ operators. They’re more concerned about the broker’s credit than the credit history of the carrier because of this, so they run credit checks on the brokers too. That means the carrier has greater protection and faster payment. It’s more flexible than broker quick pay because you can also work with any broker of your choosing. For freight brokers looking to improve cash flow and ensure consistent payments, freight broker factoring provides a reliable solution, offering immediate funding while mitigating credit risk. At Charter Capital, we offer money-saving fuel card programs for our clients, free credit checks, flexible terms, and competitive rates, so you can focus on your load and not on chasing payments. To learn more, request a free transportation factoring rate quote.
July 8, 2022
QuickPay vs Factoring: What’s the Difference?
Creating consistent cash flow as a carrier in the trucking industry is a complex and often challenging task. As an experienced trucker, you’re familiar with the routine: you complete a job by moving a load, then immediately have expenses such as fuel, vehicle maintenance, insurance, and various other operational costs. These expenses accumulate steadily while you’re out on the road. Often, amidst the hectic schedule of a truck driver, it might take several days before you can sit down to process and send out an invoice for the job you’ve just completed. Once the invoice is sent, the waiting game begins. You might find yourself in a position where you’re waiting 30, 60, or even more than 90 days to receive payment for your services. This delay in payment can create significant financial strain and uncertainty, particularly for small or independent trucking companies.

Given these challenges, it’s not uncommon for carriers to start exploring different financial solutions. Many truck drivers and trucking companies begin to consider options like bank loans or alternative methods to accelerate the receipt of load payments. This is where the concepts of freight factoring and the quickpay option often come into the discussion. However, understanding the nuances of these financial tools and determining which one is most suitable for your specific needs can be daunting.

At Charter Capital, we understand these challenges, which is why we offer both freight factoring and quickpay options to our clients. Our goal is to provide truckers and trucking companies with viable financial solutions that align with their unique business needs and cash flow requirements. We believe in full transparency and have no interest in pushing one option over the other. Our primary concern is ensuring that you, as a carrier, find the most effective financial solution to maintain and grow your business. Below, we will delve into both freight factoring and quickpay, helping you make an informed decision that best suits your trucking business.

What is QuickPay in the Trucking Industry?

Quickpay is a cash flow accelerant that some brokers offer. Instead of waiting for an extended period for payment, the broker offers cash advances to carriers through a process known as Quick pay. This system allows carriers to receive funds in exchange for a discount on the total invoice amount. The discount percentage can vary, typically ranging between one and five percent of the full invoice value. Plus, the timeframe for receiving these payments also differs among brokers. While some offer same-day funding, making quick pay an attractive option for immediate cash flow needs, others might take several days to a week or more to process your payment.

Quick pay for truckers is especially beneficial, as it provides them with the financial flexibility they need to maintain operations without the burden of waiting for delayed payments. This system is crucial because many brokers themselves face cash flow challenges. They often find themselves in a predicament, waiting for shippers to settle their dues while simultaneously needing to cover the unpaid invoices from carriers. Charter Capital’s Quick Pay services are designed to bridge this gap effectively. By using Qquickp Pay, truckers can get paid within a much shorter timeframe, alleviating the financial stress associated with delayed payments and helping them manage their cash flow more efficiently. This service offers a practical solution for truckers to maintain their financial stability and focus on their core business activities without the worry of prolonged payment delays. We offer factoring services for freight brokers and can quickpay their carriers.

Benefits of Quickpay
- Speeds up your cash flow by offering a payment option that covers operating expenses more efficiently.
Drawbacks of Quickpay
- Some brokers only offer it, so if you rely on it, you might wind up accepting low-paying loads to ensure you can work with a broker who does.
- The percentage fee will vary, which may make it hard to predict expenses.
- The fees can add up, cutting into your income.
- The broker knows you’re tight on cash and may try to negotiate for lower rates.
How Does Invoice Factoring Work?

Recourse and non-recourse factoring are cash flow accelerants that factoring companies offer. This is a one-on-one relationship in which the factoring company purchases your invoice at a slight discount, provides you with immediate payment, and then collects payment from the broker. Like quickpay, the rate varies anywhere from about one to five percent of the invoice’s value. You can also generally choose between getting paid right away or waiting a few days.

With non-recourse factoring, you won’t be on the hook for paying the balance back if the broker doesn’t pay. With recourse factoring, you could be. However, this is rare because factoring companies perform credit checks on the brokers to determine their creditworthiness before an invoice is accepted. If a particular broker’s invoices don’t qualify, it’s likely because their ability to pay is in question. That helps you weed out potential non-payers too.

Benefits of Factoring
- Your cash flow is much faster. You can receive cash within 24 hours.
- Can potentially work with every broker you move loads for.
- Allows you to choose which invoices you get advances on.
- Relieves you of managing your accounts receivables.
- Helps you gauge the creditworthiness of brokers.
- May come with perks like fuel cards.
Drawbacks of Factoring
- It is generally slightly more expensive than quick pay fees due to the additional services provided, but you can shop around for a good rate.
Charter Capital Offers Additional Benefits

If you’re considering accounts receivable factoring for trucking, Charter Capital can help you even more. We offer:
- The highest advance rates in the industry.
- No application fee or hidden fees.
- A streamlined application process with very little paperwork and fast approval.
- Dedicated account managers who care about your success.
- Comprehensive reporting.
Get a Complimentary Quote

Quickpay is a good option when you need fast payment after a load, but if your broker doesn’t offer it, you appreciate the additional benefits associated with factoring, or you want to see if you can get a lower rate by factoring, you owe it to yourself to find out more. Get started with a complimentary quote from Charter Capital.
March 8, 2021
Optimized Cash Flow Solutions with Factoring
Trucking is a race against the clock. As every truck driver knows, the constant pressure to navigate traffic snarls, avoid highway closures, overcome mechanical problems, and stay awake and alert to deliver their load at the contracted time is only part of the story. Another critical element that keeps the wheels turning is effective cash flow management.

Tackling Cash Flow Challenges in the Trucking Industry

Just as the driver’s truck runs on diesel fuel, the owner’s company runs on business cash flow. Whenever a customer is slow to pay their invoice, it’s a troublesome pothole in the trucking company’s cash flow. Get enough of these slow-payers, and the result is the trucking firm’s ability to pay its own bills, expenses, and its employees can grind to a halt.

For many trucking companies, freight bill factoring provides a reliable solution to these cash flow challenges. By converting unpaid invoices into immediate cash, factoring ensures that trucking firms can manage operational costs and keep their fleet running, even when clients delay payments.

With that said, factoring is not just a solution for trucking, it plays a critical role in staffing, helping agencies cover payroll while waiting on client payments, as well as in security firms, ensuring operational stability for contracted services. It is also widely used in industries like oil and gas, where businesses rely on factoring to manage cash flow fluctuations and sustain operations. These examples highlight factoring’s versatility as a financial tool across multiple industries.

Cash Flow Small Business Problems and Solutions

Smaller trucking companies are especially at risk of cash flow management challenges problems. They have fewer trucks on the road, so the small profit margins prevalent throughout the industry hit them harder. A two- or three-truck operation can face real trouble when one of those trucks breaks down unexpectedly. Add several slow-paying customers into the mix, and suddenly the firm is confronting a severe cash flow problem at a time when they need funds the most.

Factoring Cash Flow: An Effective Solution for Slow Payments

Has this happened to your trucking company? Is your collections department currently struggling with slow-paying customers not taking care of their invoices in a timely manner? Are you looking for cash flow management solutions that will enable you to improve business cash flow and keep cordial relations with your customers, and avoid late payments or noncollectable accounts?

Real-World Use Case: How Freight Factoring Keeps Fleets Moving

Delayed broker and shipper payments can leave small trucking operations in a financial bind, especially when critical costs like fuel, payroll, and maintenance can’t wait. That’s where freight factoring becomes more than just a cash flow tool; it becomes an operational lifeline.

Example Scenario

A three-truck fleet hauls loads across multiple states, with weekly fuel expenses exceeding $6,000 and driver payroll due every Friday. When a major broker pays on a 45-day cycle, the fleet owner risks missing payroll and fuel deadlines.

How Factoring Helps

By factoring their unpaid invoices, the fleet receives cash within 24 hours. This immediate funding covers:
- Fuel cards to keep trucks fueled and routes on schedule.
- Driver wages paid on time to retain talent.
- Preventive maintenance to avoid costly breakdowns.
Instead of tapping into reserves or taking on debt, the owner leverages the broker’s credit to meet operational needs without delay. This use of factoring turns static receivables into working capital that keeps the business running and growing, load after load.

Cash Flow Improvement Through Invoice Factoring

The good news is such a solution exists that lets you keep on trucking with invoices paid and cash flow problems now in the rearview mirror. Cash flow factoring, also known as accounts receivable financing, is your ticket to improve cash flow and navigate the financial gaps in your trucking business.

Factoring your invoices is one of the best cash flow management solutions for improving your accounts receivable turnover ratio. With this type of alternative business funding, the factoring company advances you funds for your accounts receivable invoices. The factoring company pays you right away for your outstanding invoices and takes care of collecting them from that point forward, freeing you of the troublesome and time-consuming chore of payment collection. Invoice factoring is also quick – you can usually get paid within just a day or two instead of waiting the usual 30, 60, or 90 days or more.

The Benefits of Business Factoring and Improved Cash Flow

Factoring companies can get you the money you need when you need it… with no long-term obligations. Gone is the worry and hassle of slow pay collections, bad debts, and doubtful accounts. Instead, you’re now free to run your business, to buy new equipment, hire new employees, expand operations, pay bills, or whatever else you choose. And, best of all, invoice factoring isn’t a one-time solution.

You can utilize invoice factoring as often as you need to keep your cash flow running as smoothly as your fleet on a wide-open, traffic-free road. Invoice factoring is a convenient alternative to traditional bank loans or fee-laden online loans. To learn more about how factoring companies work, simply get in touch.
October 22, 2019
Merchant Cash Advances vs Invoice Factoring – Which is Best?

A Merchant Cash Advance (MCA) seems attractive. You get the large sum of money you need to keep your company running, and the lenders take an agreed upon amount from your bank account for so many weeks until the loan is paid. But beware, the reality is that MCAs are a sale of a share of your company’s future profits.

What is a Merchant Cash Advance?

For many companies, a Merchant Cash Advance (MCA) might initially appear as the quick cash solution they’ve been searching for. These advances, provided by merchant cash advance companies, promise an upfront sum of money. However, they’re tied to a portion of your company’s future credit card sales. Essentially, it’s financing based on future promises rather than concrete achievements. And while the idea of immediate capital is enticing, it’s crucial to understand the terrain. MCAs often come attached with high interest rates. So, if your company’s sales don’t meet the optimistic projections, you could be navigating a tough road of unexpectedly hefty payments.

Why Choose Invoice Factoring as a Financing Option

In the vast world of financing, companies might find themselves drawn to the promises made by merchant cash advance providers. But a more detailed look could illuminate the undeniable benefits of invoice factoring. Unlike the somewhat speculative nature of MCAs, invoice factoring companies offer advances grounded in the here and now: your unpaid invoices. This means your company is leaning on tangible, completed sales. Such an approach not only guarantees more predictable rates but also avoids the looming shadows of MCAs’ high interest rates. The process of applying for invoice factoring? It’s as efficient as MCAs, but without the dicey risks of penalties should sales predictions fall short. To put it plainly, invoice factoring lets companies maximize the value of their current invoices, ensuring a smooth cash flow that’s not at the mercy of tomorrow’s sales forecasts. So before your company gets too enamored with MCAs, it’s wise to stack up the benefits side by side. You might find that invoice factoring presents a clearer, steadier route to financing.

The Strategic Choice Between Invoice Factoring and Merchant Cash Advances

Navigating the financing options available to small business owners, particularly within sectors with longer payment cycles, demands a strategic approach to ensure both immediate cash flow needs and long-term financial stability are addressed. When considering merchant cash advances (MCAs) versus invoice factoring, it’s crucial to understand how each impacts your business’s bottom line. MCAs, while offering a lump sum of cash based on future credit and debit card sales, often come with stringent repayment terms, including daily or weekly deductions from your sales, which can significantly affect your working capital. This form of financing may seem attractive for businesses in need of immediate cash, but the higher costs and risk of non-payment due to fluctuating sales underscore the importance of considering alternative funding sources.

On the other hand, invoice factoring presents a compelling financing option for small business owners seeking to enhance their cash flow without the burden of traditional loans or the unpredictability of MCAs. By selling your unpaid invoices to factoring companies, you receive advance funds, often within one business day, giving you the working capital you need to operate and grow without waiting for clients to pay. Unlike MCAs, invoice factoring provides flexibility with repayment terms and doesn’t hinge on your daily credit card sales, making it a better alternative for managing your accounts receivable efficiently. Moreover, the application process for factoring is straightforward, with a focus on your invoices’ value rather than your business’s credit score, offering a financing solution that supports business development and allows you to take advantage of opportunities without the looming pressure of repaying a lump sum plus fees and interest.

Merchant Cash Advances vs. Invoice Factoring

Invoice factoring makes more sense for businesses that don’t deal with a high volume of credit card transactions. For instance, trucking businesses will typically find freight factoring to be more accessible, while security guard firms can tap into security factoring.

With invoice factoring, the advance you receive on your invoices is based on actual sales rather than a prediction of future sales. This means your business will benefit from the same quick cash flow and simplified approval process as an MCA with significantly less risk.

Since merchant cash advances use a prediction rather than an actual dollar amount, you may be forced to make huge payments if your sales don’t meet your projections (usually with much higher interest rates than invoice factoring rates). Payments may even continue beyond the period in which you generate revenue, which could pose a larger problem. In contrast to merchant cash advance brokers, who charge you both the payment amount and a crippling interest rate, invoice factoring companies only charge a small percentage of the invoice amount (the factoring fee).

You may also be able to benefit from the back-office services provided by invoice factoring companies, including billing and collections since they purchase your unpaid invoices and collect payments directly from your customers.

Make sure you understand the short- and long-term implications of taking out a merchant cash advance before you commit. In desperate situations, their interest rates may seem worthwhile but be aware that anything that looks too good to be true, usually is.

At Charter Capital, we help trucking companies grow with freight factoring and customer-focused services.

Give us a call at 1-877-960-1818.

February 27, 2018