Fast Cash

Todd Dills | December 01, 2010

Independents crippled by cash flow find it can be worth sharing a small piece of the pie with a factor. Getting related services helps, too.


If you’re an owner-operator running on your own authority or have a small fleet of trucks, you know broker days-to-pay has been high in recent years.

Paul Wrzesinski, operations manager for Bethlehem, Pa.-based 15-truck Patrick Trucking Services, says some of the biggest, most credit-worthy brokers often pay beyond 30 days. He says he’d seen days-to-pay of up to 46 days from one of the nation’s largest truckload freight brokers.

Since the 2008 financial meltdown, credit is much tighter, too, further squeezing cash flow, says Wrzesinski. The smaller the trucking company, he adds, the harder it is to get credit.

“It is not uncommon for me to deliver a load and do the paperwork in my truck, using FedEx and having funds wired to my checking account within 24 hours.” — Angel Teaming owner-operator Tom Rethelford, about nonrecourse D&S Factors. D&S offers free TripPak Services for mailing, though Rethelford says he uses FedEx for better speed.

Instead of waiting for slow and sometimes uncertain payment, some independents turn to factoring companies to get access to invoiced amounts from their loads as quickly as 24 hours after delivery. Competition has reduced factor rates below what many brokers charge for their quick pay option, plus factors have expanded services to include providing access to broker credit information, collections and accounting services. While still saddled with an unsavory image, factors today can streamline cash flow for independents at a reasonable rate, freeing their clients to focus on finding freight.

Using a factoring service, you’re selling your broker or shipper invoices in return for immediate payment minus a percentage of the total. There are two types of factors.

Recourse factors

Recourse services typically fund 90 percent or less of the invoice initially, taking 3 percent to 5 percent off the top. They put the remainder in an interest-bearing reserve account, available upon collection of the invoice from the broker (usually) or shipper. In this type, the factor holds the “recourse” in its name, as ultimate responsibility for obtaining the invoice lies with the carrier. If the factor’s attempts to collect from a broker continue to fail after about 70 to 90 days, Wrzesinski says, “the factor has the right to go after us” for the entire amount of the load.

Because responsibility for obtaining payment ultimately lies with carrier, recourse factors offer independents and small fleets a low rate, generally, and a great deal of flexibility in what loads they will factor, making them popular with haulers working with new, untested brokers and other customers.

“My average customer is doing about $80,000 to $100,000 a month,” with five or more trucks, says Jeff Foil, president of SevenOaks Capital Associates, the company Wrzesinski’s worked with for seven years. “Daily or weekly, they send their invoices to me – we send 80 to 90 percent up front. When [the broker or shipper] pays in 30 days, we take out our fee and the difference [goes] in a reserve account,” available to the customer immediately.

The percentage rate ranges and variance in contract terms with SevenOaks that Foil describes depend, as with other factors, on carrier size, volume of carrier invoices and the “quality of the people you haul for,” he says. “My average guy might pay 2 percent for anything paid under 30 days, an additional 1 percent every 15 days thereafter.”

Other factors customize rate structures to fit client needs. “Our rates vary depending on the volume,” ranging from 1.5 percent to 4 percent, says Chad Wulf, vice president of RMP Capital. He says some customers, rather than take a flat rate that bumps to another rate after a predetermined period, prefer to go with a per diem, or daily, rate.

Nonrecourse factors

Internet Truckstop’s D&S Factors is a nonrecourse service, one that takes on the collection burden entirely. These have a simpler, though higher rate structure, and will not factor just any invoice. strives to maintain an open forum for reader opinions. Click here to read our comment policy.