Over the last four decades, UC Factors has factored for hundreds of freight brokers. The feedback we have obtained from these clients has given us an enlightened viewpoint of what the pros and cons are that a freight broker should consider when deciding whether factoring is the right answer and which company to factor with. Not all factoring companies are alike. There are significant differences in the services provided and in the level of experience. The following lists of pros and cons represent a consensus of what our clients have told us.
They will pay your Carriers for you
You are using someone else’s money to finance your business. Businessman have been using someone else’s money to get rich for a long time, so why not you?
Keep your personal money for yourself. No out of pocket cost for you. At UC Factors, we have no set up fees either, so there is no risk to you to get started.
Establish Good Credit with these Carriers
By paying your carriers within terms, your business establishes credit and good business ethics. UC Factors will pay your carrier when you designate us to.
You may also charge a quick pay fee to your carriers for immediate payment, which helps offset your factoring cost, which is also tax deductible.
Free Credit Checking and Analyzes on your Customers
As part of the factoring fees, they will run expensive credit reports, analyze them, and make a credit limit recommendation or deny the credit all together.
At UC Factors, we take this duty very seriously. Our Credit Managers have years of knowledge and experience, for acute accuracy in their assessments.
Non-Recourse Factors will take the credit responsibility on credit approved customers. Meaning, if your customer can’t pay the invoice due to cash flow problems, the factor will not make you pay it back to them.
This is strictly credit protection, if you do something to cause the customer not to pay the invoice, you would need to pay back the invoice to the Factor.
At UC Factors, we offer both Recourse and Non-Recourse Factoring.
Take on more business, since there is no out of pocket cost to you
Since you are not limited to only doing business you can afford to do, you an increase your overall revenue and even hire more freight agents to increase business.
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Most factoring companies will handle your billing for you. They will place an assignment stamp on your invoice and email or mail it directly to your customer for you. No need to pay for postage or bother scanning documentation to be emailed to your customer for payment.
At UC Factors, we cc our clients on all invoices emailed, this way they know exactly when their invoices are emailed to their customer. Invoices are emailed/mailed the same day we fund.
Detailed Accounting and Reporting
Recording invoices, amounts, customers, when an invoice pays and so on can be a headache and take much time away from you or an employee. At UC Factors you have access to a Portal that will give your company all details of all of these transactions.
Collection Services on Factored Invoices
Another hassle is calling your customer to get payment status on invoices not paid within terms. Checks in the mail, I didn’t get the invoice, and so on. This is all work that UC Factors does for our clients.
No need to bother with collection calls anymore, we will handle the customers with professionalism and tact. We are not a collection agency and understand the importance of proper customer care.
It IS not Free
Some might say it’s even expensive. If you are able to offer quick pay through using a factoring company, this helps offset your factoring fees. If you are also able to increase your revenue by utilizing a factoring company, this should also be taken into consideration when looking at their costs.
If you are able to save money by not having additional employees do the work covered by your factor, this too should be factored into your factor’s costs. You get what you pay for in most cases, so make sure you sign up with a knowledgeable, experienced factor, and not a new facility giving you the lowest rate.
This is your livelihood after all. Would you hire a bargain basement Doctor to operate on your eyes, or any part of your body? I think not!
Customer relationship Interruptions
Some Freight Brokers might not like the severed ties that could occur when a factor gets involved in your accounts. They feel disconnected from their customers since most of their correspondence might be with the Factor.
This doesn’t have to be the case. You are always in contact with your customer while booking loads, this is your connection. The factor will mainly build their relationship with your customer’s accounts payable department, which is beneficial to you overall, since they should have skilled personnel handling this type of matters.
They are not for everyone, try and obtain a non-recourse account if you can. The whole reason you factor is for the funds and services. If you could pay the money back, then why bother factoring at all. Your only advantage to Recourse accounts is rate, you should get a better rate if there is no credit protection. It might also make you question the validity of the credit analysis if the factor is not giving you credit protection.
At UC Factors, we understand small business and how important our expertise is to the survival of it. Either way, we give the same level of service and would never jeopardize the integrity and character of our 40+ years in the industry. Small Business is the backbone of America!
No one likes hidden fees! Read your contact well. Make sure you know exactly what you’re getting, for the fees you’re paying. Watch out for per Invoice Charge, Same Day Funding Charge, Interest Rate, Credit Report Charges, Set Up Fees, Due Diligence Fees, Non-Factored Fees and so on.
At UC Factors, you will see our rates in the Proposal prior to agreement. There will be fees for Bank Wiring or ACHing your funds. No fees for a check and we welcome walk-ins. Walk-in’s get to sit in our relaxing Client Lounge and enjoy a movie, coffee, and a snack during their short wait.
Complicated, Long Contracts
Never fun for anyone. Always seek the assistance of an expert if you do not understand your factoring agreement. It is important that you understand what you are to uphold and what is expected of the relationship, because this is a mutually beneficial relationship and your new factor is now your financial partner.
At UC Factors, we try to keep our contract as short and to the point as possible. We will explain every and any part of the agreement to you in detail. We feel it’s best for our relationship, if you know exactly how it’s all going to work with us.
Our word is as good as gold and we have never derived from our agreement where it wasn’t beneficial to our client. In other words, we have gone up and beyond for our clientele. Ask for client references, we are one of a few, if any, that will provide them.
While there are pros and cons to almost anything in this world, we believe that for freight brokers, the pros of factoring outweigh the cons. Our clients' feedback shows us that although there are some negative points with invoice factoring, they are typically offset by taking the time to choose and work with the right factoring company.
The best way to do this is to know your options and take the time to research which factor will be the best fit for your business and its specific needs.