How does quick pay work in trucking? What about freight factoring? These are common terms in the trucking industry, and understanding their differences and benefits is vital to your business’s short- and long-term health. Learn how they work with Porter Freight Funding today.
Freight Factoring vs. Broker Quick Pays
Consistent funding is important for the success of a trucking company. Operating expenses don’t stop and neither should your cash flow. Truck drivers can wait anywhere from 30, 60 or 90 days to get paid without working with a factoring company or using broker quick pays. And when your business is driven by these profits, you may not be able to wait for your invoice to go through.
Both freight factoring and quick pay options eliminate the wait time by offering payment options to speed up cash flow. When you get your money faster, you can use it to advance your business and keep your bills up to date. However, there are some significant differences between the two, and it’s essential to understand each one before deciding on what best fits your business needs.
Quick pay is the most common form of immediate payment in trucking. In this agreement, a broker agrees to advance payment to a trucking company upon completion of their job. Once your trucker has finished their work, your company submits any bills, invoices and other necessary information to the broker. The broker then delivers the funds, minus a processing fee — usually less than 5% of the invoice — and collects the invoice in time.
Freight factoring is less common in trucking circles, and not every broker offers this service. With this service, a broker buys out the invoice from a trucking company at a reduced rate, which may be similar or slightly higher than the processing fee a broker collects with quick pay. Once the trucking company does its job, the invoice becomes entirely the responsibility of the broker to collect.
At first glance, these payment options seem very similar, but they each carry certain benefits that make them suitable for different types of companies. Learn more about how freight factoring and quick pays stack up against one another below.
| Freight Factoring | Quick Pays | |
|---|---|---|
| Organization | Carriers can only factor with one factoring agent. This means you get paid from one entity on all load payments. Bank deposit information is securely stored with your factor, making sending in your freight invoices for a deposit or wire transfer the same every time. | There are different invoicing, logins, accounts, and paperwork for each broker a carrier uses. |
| Paperwork Assistance | Back-office and billing assistance is included in factoring services when working with a freight factoring company. Back-office support includes billing and invoice creation, accounts receivable and collections management, customer credit checks and fuel advance distribution. | Typically, brokers don’t offer additional services beyond the quick pay. |
| Freight/Load Options | Carriers can work with any broker or shipper (with acceptable credit) or load boards when they factor their invoices. Working with a factoring company helps truck drivers maximize profits by running the best paying loads. | Not all brokers offer quick pays. If a carrier depends on fast payments and doesn’t work with a factor, they may have to turn down higher-paying loads if there isn’t a quick pay option. If a carrier only uses quick pays from time to time, they can schedule their routes based on their cash flow situation at the time. |
| Industry Help | The best factoring companies will offer additional services like dispatching help, fuel cards, insurance partners, compliance help and equipment financing. | Brokers rarely offer additional services to assist carriers in the trucking industry. |
| Rates | Factoring rates vary depending on factors such as the size of the trucking company, monthly revenue and years in business. Once a rate is set and a contract is signed, it will stay the same on every invoice factored. It’s important to make sure there are no hidden rates or fees in the factoring contract before signing it. It’s also important to note that some factors will match broker quick pay fees. | Broker’s quick pays are specific to their business, not the carrier. Some offer one program with a fixed rate, while others offer varying rates depending on payment time. |
What is the Best Option For Your Trucking Company?
The decision comes down to your business situation and preference. Especially for new carriers and smaller trucking companies, freight factoring provides your business with security on always getting paid within 24 hours for all invoice amounts. For carriers with established relationships within the industry and who know the routes they will be running, quick pays are a great option.
In truth, the only wrong option is not choosing one at all. Both quick pay and freight factoring offer significant financial advantages over waiting around for your money for months. With low rates and advanced funding, services like the ones Porter Freight Funding deliver will keep your business running smoothly.
For more information on what is the best option for your trucking business, get in touch with us today at (205) 397-0934 or contact us today.
