Convenience or Conflict?

Points to Ponder When Your Freight Broker Suggests Becoming Your Factor, Too

Nobody can deny the value of a good business relationship, and when one has been successfully established it’s natural to look for more ways to work together. That’s why some freight brokers have been adding factoring to their company’s service offerings.

The straightforward reasoning that brokers often express to the trucking firms they work with?

“We are already connecting you with these companies on getting loads. It’s no trouble at all for us to take the next step and get the payment to you right away. We already have the information right here. How convenient is that?”

While that proposal does sound good on its surface, freight carriers have more to consider when they make their broker their factor.

The Customer List

A carrier might use one reliable broker for a portion of its hauls, but what about their other customers? If accounts receivable gets turned over to a broker/factor, the customer list does too. This precious, private information will now be shared with a company that survives by finding loads. Despite promises to the contrary, someone with the brokerage company might spot a good-paying load on that list and pounce. They see an opportunity for revenue — it’s their primary business, after all. Suddenly a carrier’s great contract goes away, lost when the customer switches to a third party for dispatch.

Freight Rates

Every haul is different, so negotiated rates will vary depending on the circumstances. Carriers need the freedom to decide when a lower-than-usual rate makes sense. What happens when a broker sees that lower rate? The ability to negotiate diminishes dramatically. The broker wants to pay the carrier the minimum, and now they know they have leverage.

Customer Relations

The fast-paced, get-it-done business of finding loads and negotiating rates requires a no-nonsense (perhaps even a brusque) approach to conversations with concerned parties. Collections calls to valued customers need a more delicate touch. Carriers should feel secure that all communications with their customers are handled with the same courtesy.

Expertise

Conventional wisdom says that trucking companies are best served by factoring companies with experience in their industry, and some brokers offering factoring services might point to their many years in the business. Experience in factoring also matters, though. An established factor can evaluate the creditworthiness of potential customers, has solid financial backing and trucking financing experts available to answer any questions about the factoring process.

Before entering into an agreement with any factoring company, carriers should take the time to ask questions, talk to others in the field for recommendations, and yes, consider past experiences and relationships as key indicators of whether a particular factor is a fit for their fleet.

After all, good business relationships aren’t based on convenience and cost alone.

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