Tag: trucking 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
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
How Can Freight Factoring Fund Your Trucking Business?

Insufficient or uneven cash flow can prevent your business from meeting its full potential and even stunt your long-term growth as a company. Trucking businesses face a number of unique challenges when trying to grow their business, including fuel costs, inventory, and more. Fortunately, your trucking business has a few resources at its disposal to keep cash flow problems at a minimum. Trucking Factoring, also known as freight bill factoring, has become a major player in cash flow management in the trucking industry, allowing trucking companies to manage their business cash flow easily and conveniently.

Freight factoring services are specifically designed to meet the unique needs of the trucking industry and the transportation industry as a whole. Trucking factoring also has a much easier application and approval process than business loans for truckers, and they do not negatively affect your company’s credit score. Small business loans for truck drivers typically include long waiting periods, but freight factoring companies can offer you approval and funding in as little as 24 to 48 hours. Factoring is the trucking financing option that gives your business the cash flow it needs when it needs it.

Build Better Credit

Few things can cause a business to fail like poor cash flow and bad business credit can. Freight factoring services allow business owners to build strong business credit by providing them with access to same-day funds to cover their expenses and pay off previous debts. Unlike traditional business loans, factoring for trucking companies works around potential poor credit history to provide adequate funds to get your business up and running. With sufficient funding, you’ll be able to rid your business of debt and focus on expanding it. And because this is a transaction where your trucking business will be selling its open accounts receivables to a freight factoring company, you are not acquiring debt. You are simply being advanced money that is already owed to you, so there are no negative marks on your credit score.

Take Advantage of Flexibility

The factoring process allows for more flexibility than the average bank loan, which means your business can take better control over its operating costs. By factoring only the outstanding invoices you want and only when you need the extra cash flow, you can decide what funds your company will use, when, and on what. Your business remains in control of your funds at all times, with no minimum or maximum volume requirements.

Dream Big

A reliable cash flow allows your business to take on bigger, better projects, knowing that your cash flow won’t be interrupted by unpaid invoices. Whether you’re interested in expanding your truck fleet, or opening up a new office, factoring can help. Not only will you be able to manage your cash flow, but you’ll also be able to add to it by attracting new business and creating new opportunities for your trucking company to expand. Even simple things like offering discounts and incentives become easier with dependable invoice factoring.

Customer Service

Banks typically offer a “one size fits all” solution to most of their clients, so there are not necessarily trucking business loans. Factoring companies, however, provide personal assistance with dedicated account managers who are familiar with your company’s individual circumstances and business goals. Factoring is the trucking finance solution that is designed to help businesses in the transportation industry focus on growing their business. Factoring companies can also help your trucking business by offering additional administrative assistance with collections support, online reporting, and credit card verification.

Get the best deal for your trucking company with Charter Capital’s freight factoring services. Take advantage of our low rates, same-day funding, no-term contracts, and more today.

September 8, 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