Common Freight Factoring Fees for Carriers
There are many fees involved when you start factoring your loads with a company.
- The first fee you will always pay to a factoring company is the factoring fee. This fee depends on the company and if it offers recourse or non-recourse factoring, which you can read more about here. Most companies start their factoring fee around 3% for non-recourse factoring with carriers. Non-recourse means the carrier is not responsible if the shipper does not pay the factoring company for delivered loads. InstaPay, for example, offers non-recourse factoring at a flat 3% fee.
- Application fees are commonly used by other factoring companies as well. You must pay the application fee without guarantee of being approved. These fees can cost a couple of hundred dollars. Sign-up with companies like InstaPay is free.
- Some companies charge a termination fee to carriers who wish to stop factoring before a contract is expired. Many contracts in the factoring industry are 90 days long and require notice of cancellation 30 days before the end of the 90-day contract. If you’re unsure of how long you need factoring or don’t want to deal with contracts with lengths, some companies allow you to cancel any time for any reason for free. It’s important to read each company’s rules and offerings carefully before you get locked into a contract!
- Certain factoring companies for carriers will require carriers to meet monthly volumes. This means you must factor a certain amount of loads per month or you’ll get hit with a fee. The fee might be a flat fee a carrier pays each month they don’t meet the minimum volume or it might result in an increase in the factoring fee percentage.
- Factoring companies might require you to pay a reserve rate. A reserve is an amount of money kept “on hold” by the factoring company as an insurance in case the broker or shipper does not pay them. This amount of money differs from company to company and will be given back to the carrier after 30 days or whenever the factoring company gets paid for the load. Once the money is released, it may take another week for the money to show up in the carrier’s account. Fortunately, InstaPay does not hold reserve rates and pays you 100% of the invoice amount at the same time, minus the 3% flat factoring fee.
- InstaPay offers free same-day ACH transfer but many other factoring companies will charge. For example, it may cost a carrier a few dollars per same-day ACH transfer per load. Other companies charge a one-time fee for a batch of loads to be paid out to a carrier’s account.
- Not every factoring company will allow a carrier to check broker credit for free. Before picking up a load from a broker, carriers obviously want to know if they’ll get paid for that load. Some companies will charge a fee for each broker credit check.
Overall, there are multiple things a factoring company can charge carriers for in the factoring process. It is extremely important to check a contract before signing it to make sure there aren’t any loopholes or extra, unnecessary fee burdens on a carrier.
If you’re looking for a hassle-free factoring process, try InstaPay – for free! We buy your invoices and handle all collections on your behalf. We offer free same-day ACH with a flat 3% factoring rate. You can sign up for free and cancel for free at any time for any reason. Sign up today.