Changing freight factoring companies can be a difficult and confusing process, especially if you are in need of a contract buyout.
Below you will find an easy-to-follow guide on how to seamlessly transition from your current freight factoring company to a new freight factoring company. Steps have been grouped into 90 days to 60 days to 30 days from when your contract ends.
90 days from factoring contract end date
Review your existing freight factoring contract
One of the most important steps to take when you're considering switching freight factoring companies is to review your existing signed contract’s cancellation policy. Some freight factoring companies can make it pretty hard for truck drivers to get out of their contracts, so the earlier you do this the better. Here are a couple things you should look for that will help you get started:
Notification timeframe: How long before your official end date do you need to inform your freight factoring company that you want to cancel your freight factoring agreement? Usually this is anywhere between 30 to 90 days.
How do you give notification: You'll need to figure out how you should give notice. A phone call to your rep might not be enough.
Fees: Are there any fees associated with canceling your freight factoring contract with your factoring company.
Research alternative factoring companies
Look for reputable freight factoring companies that specialize in the trucking industry. Consider their industry experience, customer reviews, rates and fees, funding options, contract terms, and any additional services they offer. Ensure they meet your specific needs and preferences.
Not sure what questions you should ask your prospective factoring company? Find a complete list of questions here.
Continue to factor loads
You can continue to factor loads with your current freight factoring company even after you give your notice. However, you will need to be vigilant in resolving any paperwork or invoicing issues that come up as those may cause a more complicated transition process or prevent you from being fully released when your contract ends.
60 days from factoring contract end date
Notify your existing freight factoring company
Once you have decided to switch freight factoring companies, you'll need to provide written notice to your current freight factoring company about your intention to terminate the agreement. The required notice period is most commonly 60 days, but some companies require more. Follow the contractual requirements for termination, such as providing the required notice period.
Plan your transition to your new freight factoring company
The next step after you give notice is to decide how you will transition your receivables. Factoring companies won't fully release you until they are fully paid on the invoices you submitted before your contract ended. You'll generally have two options to transition:
Wait for full release: You can wait until your old freight factoring company gets paid for your loads, but you might have to wait up to 30 days before you can start working with your new factoring company.
Do a buyout: It's not always possible for truck drivers or owner-operators to hold onto 30 days of invoices to get fully released which is why many freight factoring companies will do a buyout. Buyouts are when a new freight factoring company purchases your invoices from your old freight factoring company. This allows you to start factoring again immediately.
30 days from factoring contract end date
Get your aging report
Regardless of whether you are planning to do a buyout or not, it's important to get your aging report so you know what loads are still outstanding and if there are any issues that need to be resolved. Issues like missing documents, accessorial issues, or claims can cause your release process to be much longer and complicated.
Prepare for the buyout process
If you are planning to do a buyout to transition companies you'll want to understand how the process works. For example, at TruckSmarter, the process usually takes about a week and there are 3 short steps:
1. Aging Review: TruckSmarter will take a look at the invoices you have recently factored and reach out to some brokers to confirm load details
2. Onboarding: While TruckSmarter is working - you can expect to fill out onboarding information just like any non-buyout carrier.
3. Signing the Agreement: There will be a buyout agreement that will be signed by your old freight factoring company, TruckSmarter, and you.
Once all three steps are completed, you will get the release letter from your old freight factoring company and will be able to factor loads with your new company.
We hope this helps you on your journey of building your trucking business. Even if you’re not ready to switch but simply want to speak with someone about your options, complete this contact us form.
If you would like TruckSmarter to remind you about your contract end date, we can let you know you when your company requires a cancellation notice, so you aren't stuck in your current contract longer than you want to be. This will help you avoid getting your contract auto-renewed and have options at the contract end date to switch or stick with them.
To learn more about freight factoring, visit trucksmarter.com/freight-factoring or contact our Chicago-based factoring team at factoring@trucksmarter.com.
