Some trucking factoring companies are upfront and transparent and only charge factoring fees based on a percent of your invoice or fees you have agreed to in advance. Conversely, others are not transparent and have a list of fees the length of your arm. If you are wondering if you are speaking with a trucking factoring company that is transparent and straightforward, here are some of the fees to ask about.
Application / Sign Up Fees
Some trucking factoring companies will make you pay an application or sign-up fee just for completing their application with no guarantee of being approved. This fee could be a few hundred dollars.
Monthly Minimum / Monthly Volume
Monthly minimum fees are charged by some freight factoring companies. They will have you sign a contract stating that you will factor a certain amount of invoices with them each month. Sometimes monthly minimums can also be tied to a lower rate. However, if you don’t meet that minimum for one month, your fee can automatically go up for the remainder of your contract. These minimums may seem of little concern, but what about a month in which you take a vacation, or your truck breaks down?
Per Invoice Fee
Some trucking factoring companies will charge a per invoice fee to make the factoring rate look lower. This fee will be applied to every invoice you submit for payment.
Credit Check Fee
Checking your brokers and shippers credit is an invaluable tool to help ensure you will be paid. Additionally, the creditworthiness of your brokers and shippers is what trucking factoring companies use to approve your application and set your fees, not your credit score. Some factoring companies will charge you an additional fee to run the credit checks, and some won’t. You should ask what service the factoring company is using to check credit. It is imperative to ensure it is a reliable source with good information, such as Ansonia Credit Data or Dunn and Bradstreet. As compared to the load board system that only provides a colored dot.
Direct Deposit / ACH Fee
Services such as direct deposits make getting your money quicker and easier. Some freight factoring companies will charge you an additional fee every time you choose direct deposit as how you want to receive your money.
Fuel Card Fee
To save you time, having your money loaded directly onto your fuel card is one option many trucking factoring companies will offer you. However, with some factoring companies, this too will come with an added fee.
Fuel Programs, Maintenance Programs, and other Affiliated Programs
To offer you a lower factoring rate, some trucking factoring companies will offer you various programs you can commit to. These programs include fuel programs that lock you into spending a certain amount of money with them on fuel every month. For example, they will lock you into spending $1,000 on fuel every month. This sounds like no problem at all. Who doesn’t spend $1,000 on fuel? However, what happens if your truck breaks down or you go on vacation? If you don’t continually hit those minimums, they will have a clause in the contract that states your rate will automatically go up for the remainder of your contract. Additionally, they may have a maintenance program for a set fee every month or other ways to squeeze more money from you.
Many freight factoring companies will want to lock you in for a long-term contract. Factoring companies with termination fees will hold you hostage with this high fee making it unfeasible for you to cancel. Termination fees will apply if you don’t need their services any longer while under contract or if you want to switch to a different factoring company.
Examples of how these trucking factoring fees can add up
Hidden Fees Trucking Factoring Company
Bob contacts Hidden Fees Trucking Factoring Company. He submits his application and has to pay a $250 application fee. They initially offered him a rate of 3.49%. Hidden Fees then talks him into agreeing to a monthly volume of $50,000 and spending $1,000 per month on their fuel program. Agreeing to these brings Bob’s rate down to 2%.
Hidden Fees charges him $5 to run a credit report on the broker from which he wants to factor invoices. At this point, Bob has spent $255 and not factored one invoice! Then Bob sends in his first invoice for $1,000. They then charge him $5 to submit and process the invoice, not to mention the $15 it cost him to overnight the invoice to them. Bob wants the money direct deposited into his account, so they charge him another $5. He had initially thought he would get $980 direct deposited, but with all these extra fees, only $950 is deposited, turning that rate of 2% into 5%.
Two months later, things get worse for Bob when his truck breaks down, and he is off the road for a week. As a result, he can’t meet his fuel minimum and monthly volume. This automatically raises his rate to 3.75%. Then you add in all those additional fees, and Bob only gets $932.50 for that $1,000 invoice paying an actual rate of 6.75%. He then decides factoring is not working for him. Bob tries to terminate his contract but is told it will cost him $5,000 to cancel, so he is stuck for another 8 months with his higher rate.
Tetra Capital – A transparent trucking factoring company
Mike contacts Tetra Capital about their factoring services. He submits his application and pays NO application fee. Mike is approved within hours, offered a rate of 3% after Tetra Capital ran an Ansonia Credit Report on his broker for FREE. He does not have to commit to a monthly volume or a fuel program. Mike decides to sign an agreement with Tetra Capital and has paid them NOTHING so far. He submits his first invoice for $1,000. He scans a copy of the invoice using a free app on his phone and submits it to Tetra. Mike has asked for his money to be direct deposited into his account. He finds that he has the $970 he expected in his account within hours of sending in his invoice.
Two months later, Mike’s truck breaks down, and he is off the road for a week. Once he is back on the road, he submits another $1,000 invoice. He finds that again he gets the $970 he expects to with his rate of 3%. Mike is very happy with the service he is receiving from Tetra Capital; however, if he were not, he would find that he could terminate his contract at any time for no additional fee.
Which trucking factoring company would you prefer to work with? If your answer is Tetra Capital, the transparent factoring company, give us a call today!