What is freight factoring? Is it a good idea for your fleet? We’ve laid out some of the basics to make freight factoring easier to understand! If you’ve still got questions, feel free to contact Porter Billing Services. We would love to help!
Non-Recourse Factoring vs. Recourse Factoring
There are two types of freight factoring: non-recourse and recourse. Non-recourse factoring means that your factor accepts the risk when your customers do not pay on time or do not pay at all. Your fleet is not responsible. This type of factoring helps protect your fleet from brokers and shippers who refuse to pay or who go out of business. Porter’s Non-Recourse program also includes billing, so you don’t have to worry about creating or sending invoices.
Recourse factoring involves the factor collecting payment from your fleet if the customer does not pay within factoring terms, usually 90 days. In other words, if your factor is not paid within 90 days, your fleet must purchase the invoice back from the factor and collect their payment from the broker or shipper.
Collections & Buy Back Process
Through non-recourse factoring, after you submit your invoices, your factor will give you an “advance rate” which is typically equivalent to 80-90% of the factored invoice. Your clients will most likely receive a notice that states all payments should be made directly to your freight factoring company. Your clients will have anywhere from 30-90 days, according to invoice terms, to make their payment. Then, the remaining balance minus any fees will be passed on to your fleet.
An asset-based funding method, non-recourse factoring is the ideal funding solution for your company as it does not involve borrowing from the bank or opening another line of credit. Receive the working capital you need without the credit risk.