Freight factoring is a convenient way to ensure you have a steady flow of cash coming in. But, you may find that the company you chose isn’t the right fit anymore. While they were great years ago, your trucking business has grown, and with that growth comes new needs. It’s time to switch freight factoring companies, but you’re not sure how to go about it. Here are some tips.
Reasons to Switch to a New Freight Factoring Company
How do you know when you should switch?
- The Rates Have Increased
Start with the rates. If the rates have increased but services haven’t changed, you have to ask yourself what the higher fee is getting you. Odds are that it’s not benefitting you at all.
If rates go up and you’re being offered faster payments or additional free services, it can be worthwhile to stay. If the rates increase and services haven’t improved or have even worsened, it’s time to consider moving on.
- Your Needs Have Changed
When you first started factoring your invoices, you needed an immediate flow of cash. You’ve grown now, and your needs are different. You’d benefit from a low-interest line of credit to purchase new trucks and expand. You might have improved your business credit score and want to get business credit cards for your drivers to use for fuel discounts when fueling up.
Some invoice factoring companies stick to the bare minimum. They factor invoices but offer few services beyond that. You’re ready for add-on services like job boards you can access via an app when you’re on the road. You may want to be able to track your drivers and have real-time information regarding their current location. Free business credit checks, same-day payments, and hassle-free invoice downloads are also important.
If your current invoice factoring company doesn’t offer the services you need, it’s a good idea to find one that does. Switching may be a hassle, but it’s a step that will save you money in the long run.
- The Company Doesn’t Cater to Trucking Companies With Small Fleets
Some invoice factoring companies don’t want to put in the effort to help small trucking businesses. If you’ve decided to downsize rather than shut down completely as you near retirement age, you may need to find a company that will work with you through the downsize.
- Customer Service Has Worsened
You loved the customer service team, but it’s changed in the past few months. Customer satisfaction used to be their guarantee, but they seem to be eager to get your money and not respond to your concerns. It’s clear that under new management, customer service isn’t the same. If you’re unhappy, it’s a great reason to switch to another freight factoring company.
The Steps to Follow When Switching Freight Factoring Companies
Now that you know you need to switch, you have to start taking the steps to make the change. This is where you need to ensure you don’t miss any important steps.
- Read Over Your Current Contract
Go over your current contract and find the rules on termination. Look specifically for the area called something like “Term and Termination.” Are there penalties if you end the contract before the contract’s renewal date or term? If there are, you may want to wait it out and switch once the contract’s end date arrives. If there are no penalties, you can switch now without worrying about cancellation penalties.
- Find a New Factoring Company
Start looking at your options for a new freight factoring company. If you’re unclear about the terms, call, chat, or email them to get answers. Don’t get started if you’re not completely clear on how it works and what the factoring fees and other charges are. You want to know if there are administrative fees, factoring fees, bank fees, etc. Ask if the arrangement is recourse or non-recourse. Finally, ask what they require if you switch to them. They may want a release letter from your current company.
- Contact Your Current Factoring Company
Once you’ve found the company you want to switch to, contact your current factoring company as instructed in the contract. You may need to give formal notice through a certified letter. If that’s what’s required make sure you take that step. If you need a release letter, make sure you get one. If you don’t receive it by the date they promised, follow up. Ideally, you want them to email it to you.
- Complete the Application Process With Your New Invoice Factoring Company
Once you have the release letter, fill out the application with the company you researched and decided to switch to. Go over the contract and make sure everything is clear and understood before you sign. Fill out any authorization paperwork that the new invoicing company needs to look at any accounts you have factored.
- Allow the two companies to communicate After submitting the information and authorization paperwork, the new company will work with your current company to close and transfer your freight factoring account. Watch for the buyout agreement and make sure the information is correct.
- Inform Your Brokers and Shippers
Once you’ve completed the application process and know that everything is set. Tell your brokers and shippers. They need to know that there is a change coming. You don’t want to forget to tell them and suddenly find they won’t submit payment because they don’t recognize the invoice factoring company’s name.
- Wait for the Effective Date to Arrive
When you get the buyout agreement, you’ll know when the final switch will take place. That’s the day when you’ll stop working with your former invoice company and will only work with the new one. You’ll start seeing payments from the new freight factoring company at this point. Make sure everything goes well and let them know if you’re missing any expected payments.
Switching from one freight factoring company to another takes time, but it can be well worth it if you’re paying high rates and getting little in terms of service. As long as you’ve taken the time to compare companies and found the one that best fits your current needs, switching freight factoring companies is a savvy business move.
Saint John Capital is a comprehensive freight factoring company with the low rates you desire, and we have a range of services designed to help you run your businesses efficiently. Our app allows you to check a broker or shipper’s business credit score, find new loads on the job board, and track your drivers’ locations in real-time. The app also allows you to upload bills of lading for same-day payment if you submit them on time.
Fill out the online application to set up an account with Saint John Capital. We’re happy to discuss our fees with you and answer your questions and help you get started switching to our freight factoring arrangements.
