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How to switch trucking factoring companies. A step-by-step guide.

Dan Kao, CEO, Co-Funder

Aug 14, 2023

Switching factoring companies in the trucking industry typically involves several steps. Here, you’ll find an easy to understand, 10 step process. ‍

1. Evaluate your current factoring arrangement

Assess your current factoring company's performance, including factors such as the fees they charge, the quality of customer service, the speed of funding, and any additional services they provide. Determine why you are considering switching and identify your requirements for a new factoring company.

2. Research alternative factoring companies

Look for reputable factoring companies that specialize in the trucking industry. Consider factors such as 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.

3. Evaluate your current factoring contract

Assess your current contract with your existing company. See how long you’ve committed to, figure out how much time you have remaining under the contract, and what are the implications and costs for canceling early. Your new factoring company may be open to buyouts. A truck factoring buyout refers to a situation where a trucking company seeks to terminate or buy out their existing factoring agreement with a factoring company before the contract's agreed-upon term or termination date.

4. Request quotes and proposals

Contact the selected factoring companies and request quotes or proposals based on your trucking business's specific requirements. Provide them with accurate information about your company's size, average monthly receivables, creditworthiness, and any other relevant details. There will likely be a clause for leaving notice and how far in advance that notice should be. 

5. Compare terms and negotiate

Carefully review the terms, rates, and fees offered by each factoring company. Pay attention to factors such as advance rates (the percentage of the invoice value provided upfront), recourse or non-recourse options, contract lengths, termination clauses, and any other conditions that may affect your business. Negotiate with the factoring companies to secure the best possible terms that align with your needs.

6. Due diligence

Before finalizing your decision, conduct thorough due diligence on the potential factoring companies. Check their reputation by reading customer reviews, assessing their financial stability, and verifying their credentials, such as licenses and industry memberships. Ensure they have a reliable track record and can meet your funding needs consistently. Ask if they have customers you can speak with to learn more about their experience. 

7. Notify your current factoring company

Once you have selected a new factoring company, provide written notice to your current factoring company about your intention to terminate the existing agreement. Follow the contractual requirements for termination, such as providing the required notice period.

8. Set up the new factoring arrangement

Work closely with your new factoring company to set up the necessary accounts and paperwork. Provide the required documentation, such as invoices, proof of delivery, and any other paperwork required to initiate the funding process. Ensure that both parties are clear on the terms, expectations, and any additional services you may require.

9. Transition and transfer receivables

Coordinate with both your current and new factoring companies to smoothly transfer any outstanding receivables. Communicate with your clients and update them about the change in your factoring arrangement to ensure a seamless transition.

10. Review and monitor the new relationship

Once the switch is complete, closely monitor the performance of the new factoring company. Evaluate their service quality, funding speed, and responsiveness to ensure they meet your expectations. Provide feedback and address any concerns promptly to maintain a healthy working relationship.

Remember, the specific steps may vary depending on the factoring companies involved and the terms outlined in your contracts. It's important to carefully review all documentation and seek legal or financial advice if needed before making any decisions or signing contracts.

Not sure what questions you should ask your prospective factoring company? You can find a complete link of questions here.

To learn more about freight factoring, visit trucksmarter.com/freight-factoring or contact our Chicago-based factoring team at factoring@trucksmarter.com.

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TruckSmarter is a financial technology company, and is not a bank. Banking services provided by Blue Ridge Bank, N.A. and Thread Bank, Members FDIC. The TruckSmarter Visa Debit Card is issued by Blue Ridge Bank, N.A. and Thread Bank, pursuant to a license from Visa U.S.A. Inc. and may be used everywhere Visa is accepted. FDIC insurance is available for funds on deposit up to $250,000 through Blue Ridge Bank, N.A. or Thread Bank, Members FDIC.

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TruckSmarter Logo Asphalt Grey Footer

TruckSmarter is a financial technology company, and is not a bank. Banking services provided by Blue Ridge Bank, N.A. and Thread Bank, Members FDIC. The TruckSmarter Visa Debit Card is issued by Blue Ridge Bank, N.A. and Thread Bank, pursuant to a license from Visa U.S.A. Inc. and may be used everywhere Visa is accepted. FDIC insurance is available for funds on deposit up to $250,000 through Blue Ridge Bank, N.A. or Thread Bank, Members FDIC.

*Terms and conditions apply to the TruckSmarter cash back rewards program. Please see Program Terms for details.

TruckSmarter Logo Asphalt Grey Footer

TruckSmarter is a financial technology company, and is not a bank. Banking services provided by Blue Ridge Bank, N.A. and Thread Bank, Members FDIC. The TruckSmarter Visa Debit Card is issued by Blue Ridge Bank, N.A. and Thread Bank, pursuant to a license from Visa U.S.A. Inc. and may be used everywhere Visa is accepted. FDIC insurance is available for funds on deposit up to $250,000 through Blue Ridge Bank, N.A. or Thread Bank, Members FDIC.

*Terms and conditions apply to the TruckSmarter cash back rewards program. Please see Program Terms for details.

TruckSmarter Logo Asphalt Grey Footer

TruckSmarter is a financial technology company, and is not a bank. Banking services provided by Blue Ridge Bank, N.A. and Thread Bank, Members FDIC. The TruckSmarter Visa Debit Card is issued by Blue Ridge Bank, N.A. and Thread Bank, pursuant to a license from Visa U.S.A. Inc. and may be used everywhere Visa is accepted. FDIC insurance is available for funds on deposit up to $250,000 through Blue Ridge Bank, N.A. or Thread Bank, Members FDIC.

*Terms and conditions apply to the TruckSmarter cash back rewards program. Please see Program Terms for details.