Questions for before You Get Into a Freight Factoring Contract

by Kevin Smith Author

If you are considering freight factoring companies in Appleton, WI, there are a few things you need to make sure of before you enter into a factoring agreement. They make sure you, as a customer of the factoring service, are covered. Here they are.

Read the Contract Until You Know It

This may seem simple, but it is amazing how many times the “small print” ends up creating a scenario where the business using the factoring service did not anticipate. This could pertain to outstand invoice penalties, payment terms, credit reviews, even who the business can deliver freight to in order to have the factoring company honor their submissions.

Read the entire contract, if you can, have a lawyer look into it and do not sign anything until you understand the terms of the agreement with no questions. For example, make sure the company you are working with only files an “accounts receivable lien” versus an “all assets lien.” This difference can be huge if you end up with a customer that does not pay on time or if you end up in court.

Understand Your Role and Responsibilities

Make sure you know what you are responsible for completing as part of the factoring agreement. Determine if you are collecting form your customers or the factoring company is. Do you have a minimum delivery every month to comply with the contract? Is the contract per job, monthly or longer? Are you responsible for debt collection?

All of those questions can mean work for you or work for the factoring company. Understanding what is required of you before you get started will help you decide if the deal is right for you as well as decide how to allocate your own resources to make sure you can hold up your end of the bargain.

Know What You Want from the Factoring Service

If they are collecting from your customers, is it ok if they take a “bad cop” approach? Or do you want them to build a relationship with your customers the way you have? If something ends up contested, do you want a company that immediately goes to court or prefers mediation? Will the company work with you as a partner or more as a funding source? Will they do a credit check on your customers and will they put stipulations on who you can work with?

Each of these questions can help you build a profile of the type of company you can do business with. It will also help you weed out the companies that are not a good fit.

A freight factoring relationship can be a cash flow savior or a nightmare. Making sure you cover your bases before you sign with any freight factoring companies in Appleton, WI, should be a priority.