If you work with load boards or in the spot market freight industry, you might wonder: Can you use load factoring for your spot market freight loads? The answer is yes, and here’s how it works.
How Spot Market Freight and Load Boards Work
Spot market freight involves one-off loads. Trucking businesses often find such assignments through load boards. Unlike long-term contracts, the spot market trucking industry is based on temporary or seasonal work. This kind of freight often requires quick turnaround and flexibility, and may involve a significant amount of downtime, which can cause problems for freight companies that need to keep paying their overheads between loads.
Most Popular Load Boards for Small Fleets and Owner-Operators
Freight companies and owner-operators often use popular load boards such as DAT, Freight Finder, and Load Match. These platforms connect trucking companies with shippers looking for immediate transportation at the best possible rates.
Short-Term Contracts and the Risk of Non-Payment
Although spot market freight can offer lucrative opportunities, it also comes with the risk of delayed payment. Spot market transactions generally don’t involve the same contractual agreements as long-term contracts. Truckers will often agree to longer payment terms. In conjunction with the unpredictable and sporadic nature of doing business in this way, the long payment terms can lead to frequent cash flow shortages. Invoice factoring is the best way to fill those shortages.
Can Factoring Be Used for Load Board Freight?
Is factoring for spot market freight a viable option for trucking companies? It can be a quick and effective solution, but there are some things you will need to take into account.
For factoring to be successful with spot market freight, the broker you work with must be credit-approved. This helps to reduce risk and ensure that you are not trying to factor invoices for customers who are bad payers. Before you start factoring, check which brokers your factoring providers work with, and which ones are most eligible for factoring.
How Factoring Companies Vet Brokers Before Funding
Factoring companies for spot freight thoroughly vet brokers before agreeing to factor any invoices. This includes checking the broker’s payment history, creditworthiness, and overall reliability. Working with a reputable factoring provider ensures that your invoices are only factored when the broker is likely to pay on time, reducing the risk of non-payment and making the process smoother.
Typical Approval Timelines and Limitations
The approval timeline for spot factoring is usually quick, but it can depend on the specific factoring company you’re working with. Typically, after a broker is credit-approved, you can expect a turnaround time of 24 to 48 hours. However, limitations on the types of loads, payment terms, and other factors can vary by provider. Be sure to discuss these details with your factoring partner before making any commitments. If you’re working with Integrity Factoring, you can speed up the process by choosing a pre-approved broker.
Tips to Make Your Loads From Load Boards Factorable
To ensure that the loads you accept from load boards are actually factorable, there are several steps you can take. Improve your chances of securing factoring as follows:
Use Rate Confirmations with Full Broker Info
Always ensure that you have rate confirmations from the broker, complete with all the necessary details such as the freight rate, pickup and delivery information, and terms of payment. This ensures your invoice is complete and accurate, making it more likely to be approved by your factoring company.
Submit Clean BOLs, PODs, and Invoices Promptly
Submitting clean bills of lading (BOLs), proofs of delivery (PODs), and invoices as soon as possible is key to expediting the factoring process. Any discrepancies or delays in submitting these documents can hold up the factoring process and cause payment delays. Standard requirements often include clear rate confirmation, signatures, and accurate customer invoicing to ensure fast approval.
Avoid Red-Flag Brokers with Poor Credit History
While freight factoring for trucking is an excellent solution, it only works when you choose a broker with a good credit history. Brokers with bad payment records could cause complications in the factoring process or even result in non-payment. Always verify your broker’s creditworthiness before factoring your invoices.
Choosing a Factoring Company That Supports Spot Market Freight
If you’re in the spot market or using load boards for occasional loads, you need to work with a factoring company that understands the unique circumstances of these projects. Here are some tips for choosing the right provider.
Look for Factoring Companies with Fast Approval Processes
Since spot factoring typically involves short-term contracts and one-time loads, you need to work with a factoring company that offers fast approval. Look for factoring companies that have the expertise and experience to vet your brokers and grant approval as quickly as possible.
Get Approved for Spot Factoring
Spot factoring is the perfect solution for trucking companies looking for a flexible, one-time cash flow boost without being tied to long-term contracts. Whether you need a quick cash injection for one-off loads or to manage seasonal peaks, it allows you to keep your business running smoothly without the stress of minimum commitments. By choosing the right partner, you can ensure that you get the support you need when you need it most.
With years of experience in the trucking industry and tailored, business-friendly terms like no volume requirements, Integrity Factoring can help streamline your cash flow process. Request a free quote to get started.
