Broker Factoring Mythbusters: I Have the Lowest Rates
When doing business, we may think we have the best and lowest rate. That we are ahead of the competition and doing everything we can to stay on top. The reality is that some market trends and news that could guide new business choices may slip under our radars.
Recently, carriers’ expectations for quick payments have increased, partly due to the number of well-funded technology startups or “digital freight brokers” that are offering same and next-day payments to carriers to secure capacity in a tight market.
That brings us to myth 3: my rate is already the lowest!
Increased competition and market demand have lowered the cost of factoring and given brokerage firms the means to offer quick payment to carriers at lower costs to secure capacity.
When evaluating low-cost factoring arrangements, freight brokers will find that some companies have low rates that come with additional transaction fees such as to wire payments to carriers.
Factoring companies that operate the most efficiently can provide flat fee structures with no hidden charges and assume all of the risk for collections. New technology has enabled factoring companies to more efficiently manage freight bills and monitor various data sources to proactively detect lending risks, which is essential to offer lower costs and no hidden fees.
Factoring has traditionally been viewed as a last resort for freight brokers to access working capital quickly to stay afloat. New services are now available that offer low, flat fees with no hidden costs, which have made it possible for brokers to use factoring as an essential, strategic tool to support business growth and compete more effectively for truck capacity.