factoring questions

Frequently Asked Factoring Questions

Q. What is factoring?

Factoring is the sale of invoices (accounts receivable) at a discount. Factoring is a financing tool used by small and large businesses to increase cash flow and raise working capital without the incurring debt. Factoring has been used by companies in many industries for hundreds of years to bridge the gap between completing a job and getting paid for it. Invoice factoring is popular in industries such as trucking, staffing, manufacturing, oil field services, and wholesale distribution. Most companies that sell goods or services to other companies or to the government can qualify for factoring. A financial institution that provides factoring services is called a “factoring company.”

Click here for more on what is factoring

Q. How can factoring benefit my company?

Interstate Capital can save you time and money by improving your cash flow, assisting with collections, and providing funds to grow. All businesses in a variety of fields can benefit from receiving payment upfront on completed work rather than waiting for weeks and months for customers to pay. Companies in different industries use their advances in different ways. Here are some examples.

  • Motor carriers: Use our funds for fuel advances and to pay drivers.
  • Staffing companies: Use our funds for payroll.
  • Manufacturers and wholesalers: Use our funds to pay factories, buy inventory, and cover payroll.

Q. Is there a limit on how much I can factor?

No, there are no limits. How much money Interstate Capital will make available to you is limited only by your customers’ financial strength and payment performance.

Q. How do I get started and how long does it take to get funded?

Starting with Interstate Capital is easy by email or phone. Take the first step by speaking with a friendly factoring expert – you’ll be matched with a specialist with experience in factoring for your industry. CLICK HERE to set up a brief and helpful cash flow consultation at no charge or CLICK HERE for an instant customized factoring rate quote.

The approval process is fast at Interstate Capital and you can expect a response within one or two business days after submitting your paperwork. As one of the largest independently owned factoring companies in the industry, Interstate Capital makes decisions quickly without outside interference. As soon as you are approved, you can typically receive funding on your first invoices that same day.

Q. Do I have to factor all my invoices?

No. You are free to factor as many invoices as you desire within the framework of your factoring agreement and you can pick and choose which invoices you would like to factor.

Q. How do I know if my accounts are eligible to factor?

You can submit credit inquiries on-line 24/7 on the easy-to-use Interstate Capital client portal and in most cases, you will receive an automated approval. Otherwise, you will receive a quick response from our credit department during normal business hours. For our motor carrier clients, Interstate Capital offers free membership in www.FreeFreightSearch.com, the world’s largest free load board and the site of more than 10,000 continuously updated freight broker credit reports.

Q. What happens if I sell you an invoice that my customer fails to pay?

If your customer fails to pay a factored invoice within 90 days, you are responsible for “repurchasing” the invoice unless it was approved to be purchased on a “non-recourse” basis.

Q. What happens if you receive a payment from my customer that relates to an invoice I did not factor?

Subject to terms in our service agreement, we give you your money back without a fee.

Q. How do I keep track of invoices I have factored and payments you receive from my customers?

The easy-to-use Interstate Capital client website provides 24/7 on-line access to all your invoice images and reports. All real-time reports are available in PDF and Excel formats for easy portability, viewing, and printing. Each new client receives one-on-one training on the client website and continuing technical support as needed.

Q. What will my customers know about the factoring process?

With the popularity of factoring in today’s fast-changing economy, factoring is more and more common for businesses in many industries. If your customers are located in North America, it is very likely they have many vendors who are factoring and they already understand the process. They will know that you are factoring when they receive the standard Notice of Assignment (NOA) from Interstate Capital with a new address for payments on your invoices. When the NOA letter is received, your customer’s accounting staff simply updates the mailing address for future checks for work you’ve completed after the date of the letter.

Factoring sends your customers the positive message that your company is going to have the financial resources needed to deliver the service or finish the job they need. The old thinking about factoring was that only companies in difficult financial situations sought factoring services. Today the message is just as likely that your company is solvent and poised for growth with improved cash flow.

Q. How will my customers know that they are supposed to remit payments to you?

Your customers will receive a Notice of Assignment letter from Interstate Capital. The letter instructs your customer to remit payments on your account to Interstate Capital, with the addresses and bank information that they will need for sending payments. We also require your invoice to contain our remittance address or wire instructions.

Q. Am I eligible to factor if a UCC is filed against my company?

Factoring companies are often able to fund against your existing accounts receivable even if a UCC (Universal Commercial Code) notice is filed before ours. Often, we can obtain a subordination agreement from other lien holders. In many cases, Interstate Capital can get consent from your lender or bank that will allow you to factor your accounts receivable with Interstate Capital.

Q. Do you factor owner-operators and small fleets?

Interstate Capital is a leader in factoring small motor carriers and owner-operators. Our factoring program for small fleets offers services unmatched by other transportation factoring companiesTake advantage of fuel advances when you pick up loads, 100% advance upon delivery, invoice preparation, same-day funding, and 24/7 online access to your account.

Q. My company has a federal tax lien. Am I eligible to factor my accounts receivable?

Yes, you are eligible, if we obtain a subordination agreement from the Internal Revenue Service.

Q. Do I have to maintain a reserve?

No. Interstate Capital has “zero reserve requirement.” This means that within one banking day of our receipt of payment from your customer, we will make available to you the unadvanced portion of your invoice, minus a small factoring fee, less any deductions taken by your customer. We disburse reserve funds daily upon request at no charge.

Q. How do you approve credit limits for my customers?

Interstate Capital provides 24/7 on-line credit approvals. In many cases, you will receive an automated approval before, during, and after our normal business hours. Motor carriers also use our own free transportation credit bureau, www.FreeFreightSearch.com, where credit reports are posted on more than 10,000 freight broker.

Q. Do you provide loans?

Interstate Capital provides loans for plate and insurance renewals for its motor carrier clients. Other loan requests for equipment are evaluated on a case-by-case basis and/or handled by an ICC affiliate that provides funds for inventory finance and purchase order financing.

Q. How does factoring work for a manufacturer/wholesaler?

Let’s say you have a purchase order for a $1,000 worth of product, issued by a credit-worthy customer like Target. The terms of purchase are Net 30 days and per your factoring agreement, Interstate Capital purchases your Target invoices at a factoring rate of 0.59% per invoice every 10 days. If you have an 85% advance rate with Interstate Capital, you will receive $850 by your choice of payment method (ACH direct deposit, wire transfer, check, etc.) upon our confirmation that Target has received the product at their distribution center. Target is notified to remit payment on your invoice to Interstate Capital.

Upon Interstate Capital’s receipt of payment from Target, you will receive a second disbursement from ICC of $150, minus our fee of $17.70, if we are paid within 30 days of the date of your initial advance. We would subtract $5.90 for each additional 10-day period under this pricing scenario.

Q. How does factoring work for a small trucking fleet or owner-operator?

Let’s say you haul a load for a freight broker. You log into your client website at MyInterstate.com to check credit on your customer. As soon as the load is picked up, scan in the load confirmation and upload the confirmation on MyInterstate.com to request a fuel advance. You are eligible for a fuel advance when the pick up is confirmed.

When the load has been delivered, the bill of lading and other proof of delivery can be scanned and uploaded on MyInterstate.com. That day or the following day, you will receive 100% advance on the load, minus a small factoring fee.

Q. How does factoring work for a staffing firm?

Let’s say you place a temporary employee at your customer’s office to receive wages of $1,000 and ICC has approved a sufficient credit limit for your customer, who specifies Net 30-day terms. You provide us a copy of the invoice, work order and time sheet signed by the supervising manager. ICC agrees to purchase your $1,000 invoice at a rate of 0.59% per invoice every 10 days with a 90% advance rate.

You will receive an advance of $900 by your choice of payment method (ACH direct deposit, wire transfer, check, etc.) and your customer is notified to remit payment on your invoice to Interstate Capital. Upon Interstate Capital’s receipt of payment from your customer, you will receive a second disbursement from ICC of $100, minus our fee of $17.70, if we are paid within 30 days of the date of your initial advance. We would subtract $5.90 for each additional 10-day period under this pricing scenario.

Q. What is different about Interstate Capital’s load board?

FreeFreightSearch.com is the world’s largest free load board. Membership in FreeFreightSearch.com is 100% free for motor carriers and freight brokers. This easy-to-use freight matching site enables motor carriers to find freight, get fuel advances, and receive 100% payment on delivery without ever leaving the site. Freight brokers can post an unlimited number of loads and search for available motor carriers with the equipment needed in the location needed.

In addition to freight matching, FreeFreightSearch.com allows motor carriers to pull an unlimited number of free freight broker credit reports. The FreeFreightSearch credit reports display Interstate Capital’s first-hand payment history with each broker. FreeFreightSearch.com credit reports also contain a link that allows motor carriers to obtain fuel advances and 100% payment on delivery with one click. Motor carriers may also jump from a freight broker’s credit report to a page that displays all of that broker’s live loads that are eligible for fuel advances and quick pay from the site.

For the tens of thousands of carriers seeking fuel advances and quick pay, FreeFreightSearch.com is a trusted place to start their load search and receive fuel advances or quick payments on selected loads. Freight brokers are automatically paid commissions on the load board’s quick pay fee, which can increase the broker’s revenue per load by more than ten percent, depending on the freight bill amount. FreeFreightSearch.com is a subsidiary of Interstate Capital, North America’s premier transportation funding service for nearly 25 years. As transportation funding experts, Interstate Capital and FreeFreightSearch.com are able to leverage experience and technology to combine freight matching with funding, saving motor carriers time and money.

Other freight matching sites charge hundreds, even thousands of dollars per year for just a “basic” load board subscription. FreeFreightSearch.com not only provides UNLIMITED FREE access to many of the same loads you’ll find on those competing sites, but you can obtain fuel advances or quick pay on FreeFreightSearch.com

It is a one-stop for finding quick paying freight, getting fuel money, and getting paid 100% on delivery.

Q. What is the Platinum Broker Program?

Through Interstate Capital, FreeFreightSearch.com also offers a funding program exclusively for freight brokers called the Platinum Broker program. Freight Brokers wishing to prepare for the day when they will have to post a $100,000 bond must begin to improve their credit score now. FreeFreightSearch.com and Interstate Capital can help by establishing a quick pay program. By paying motor carriers in 30 days or less (often well before the shipper’s payment comes through), freight brokers can dramatically improve their credit score, build a history of prompt payment, and increase the probability of qualifying for the higher bonding requirement.

The cost of the freight broker’s participation in the Platinum Broker program is passed through to the motor carriers by the freight broker in the form of a discount on prompt payment. Even freight brokers who have the capital to offer their own fuel advances and quick pay can benefit by outsourcing their carrier accounts payable. Platinum Brokers display the Platinum Broker Seal and a Carrier Payment Guarantee on their FreeFreightSearch.com credit reports. Unlike competing sites that offer a payment assurance “up to $350,” FreeFreightSearch.com guarantees the motor carrier payment of the entire freight bill if the funds are disbursed through FreeFreightSearch.com. See the Carrier Payment Guarantee on FreeFreightSearch.com Platinum Broker credit reports.