- What is factoring?
- How can factoring benefit my company?
- Is there a limit on how much I can factor?
- How do I get started and how long does it take to get funded?
- Do I have to factor all my invoices?
- How do I know if my accounts are eligible to factor?
- What happens if I sell you an invoice that my customer fails to pay?
- What happens if you receive a payment from my customer that relates to an invoice I did not factor?
- How do I keep track of invoices I have factored and payments you receive from my customers?
- Do I need to tell my customers I’m factoring? And what will they think when they find out?
- How will my customers know that they are supposed to remit payments to you?
- Am I eligible to factor if a UCC is filed against my company?
- Do you factor owner-operators and small fleets?
- My company has a federal tax lien. Am I eligible to factor my accounts receivable?
- Do I have to maintain a reserve?
- How do you approve credit limits for my customers?
- Do you provide loans?
- Can you provide a sample factoring transaction for a manufacturer/wholesaler?
- Can you provide a sample factoring transaction for a small trucking fleet or owner-operator?
- Can you provide a sample factoring transaction for a staffing firm?
- What is different about Interstate Capital’s load board?
Frequently Asked Factoring Questions
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 use of debt.
Factoring has been used by companies in many industries for hundreds of years. It has only been in the past 20 years that the use of factoring became common in nearly every industry.
The most heavily factored industries are transportation (motor carriers and freight brokers), staffing, manufacturing, oil field service, 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.”
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.
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 while we wait for your customer(s) to pay us.
Q. Is there a limit on how much I can factor?
How much money Interstate Capital will make available to you is limited only by the financial strength and payment performance of your customers.
Q. How do I get started and how long does it take to get funded?
Fill out the form on our home page and we will send you a simple, no-nonsense proposal via e-mail. If you like what you see, all you have to do is click on the application link in your proposal. In most cases, Interstate Capital can provide funds within three business days.
Q. Do I have to factor all my invoices?
No. You are free to factor as many invoices as you desire for any period of time within the framework of our service agreement.
Q. How do I know if my accounts are eligible to factor?
Interstate Capital allows you to submit credit inquiries on-line 24/7. In many 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. It is a freight-matching service that also offers unlimited free freight broker credit reports on-line 24/7.
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 a prescribed number of days, 90 days, you are responsible to “repurchase” the invoice unless it was approved to be purchased on a “non-recourse” basis. See our service agreement for details.
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?
Interstate Capital provides 24/7 on-line access to all your invoice images and reports at www.interstatecapital.com. All reports are available in PDF and Excel formats for easy portability, viewing, and printing.
Q. Do I need to tell my customers I’m factoring? And what will they think when they find out?
If your customers are located in Canada or US, it is very likely they have many vendors who are factoring.
Q. How will my customers know that they are supposed to remit payments to you?
We mail a letter to your customer. The letter instructs your customer to remit payments on your account to Interstate Capital. 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 is filed before ours. Often, we are able to 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 White Glove Service for small fleets offers services unmatched by other transportation factoring companies.
For one low fee, we offer fuel advances when you pick up loads, 100% advance upon delivery, invoice preparation, invoice mailing, free use of TripPak envelopes, free money transfers, and 24/7 on-line access to images and thousands of free freight broker credit reports.
Q. My company has a federal tax lien. Am I eligible to factor my accounts receivable?
Yes, if we obtain a subordination agreement from the Internal Revenue Service or Revenue Canada.
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 our 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 department availability. In many cases, you will receive an automated approval before, during, and after our normal business hours.
Motor Carriers may also use our own free transportation credit bureau, www.FreeFreightSearch.com, where you can get thousands of free freight broker credit reports.
Q. Do you provide loans?
Interstate Capital provides loans for plate and insurance renewals for its motor carrier clients. Other loan requests 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. Can you provide a sample factoring transaction 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. ICC agrees to purchase your Target invoices at a rate of 0.59% per invoice every 10 days.
Let’s say we advance you $850 by electronic money transfer 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 our receipt of payment from Target, you will receive a second disbursement from ICC of $150, minus our fee of $17.70. There is no charge for money transfers via ACH.
Q. Can you provide a sample factoring transaction for a small trucking fleet or owner-operator?
You log into our Client Web or visit www.FreeFreightSearch.com to obtain an instant on-line approval for your load.
As soon as your driver picks up the load, fax us your load confirmation. You are eligible for a fuel advance up to 40% when we confirm pick up.
When your driver delivers, he places the original, signed bill of lading in a special TripPak envelope that we provide for you. Your driver places the TripPak envelope in any TripPak receptacle at participating truck stops by 3:00 p.m.
The following day, you will receive 100% advance and we will prepare and mail an invoice for you. You have 24/7 online access to all your invoices, bills of lading, and load confirmation forms for your records.
Q. Can you provide a sample factoring transaction for a staffing firm?
Let’s say you place a temporary or contract employee at your client’s office to receive wages of $1,000 and ICC has approved a sufficient credit limit for your client. You provide us a copy of the invoice, work order and time sheet signed by the supervising manager.
ICC agrees to purchase your invoice at a rate of 0.59% per invoice every 10 days.
Let’s say we advance you $900 by electronic money transfer upon our receipt of your documents via e-mail. Your client is notified to remit payment on your invoice to Interstate Capital.
Upon our receipt of payment from your client, 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. There is no charge for money transfers via ACH.
Q. What is different about Interstate Capital’s load board?
FreeFreightSearch.com Load Board is a revolutionary new freight matching site where motor carriers come to find freight, get fuel advances, and receive 100% payment on delivery without ever leaving the site. Membership in FreeFreightSearch.com is 100% free for motor carriers and freight brokers. In addition to freight matching, FreeFreightSearch.com allows motor carriers to pull unlimited free freight broker credit reports. Unlike competing sites, our unique credit reports display our own 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 just a click of the mouse. What’s more, motor carriers may 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 trucks seeking fuel advances and quick pay, FreeFreightSearch.com is THE PLACE to start their load search. We already have tens of thousands of trucks registered. What’s more, when we provide a fuel advance or quick pay to a motor carrier on a posted load, WE AUTOMATICALLY PAY THE FREIGHT BROKER A COMMISSION on our quick pay fee. Our commission 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” subscription. FreeFreightSearch.com not only provides UNLIMITED FREE access to many of the same loads you’ll find on those competing sites, but also provides unique and valuable services FOR FREE. Motor carriers not wishing to obtain fuel advances or quick pay will find many of the same loads available on competing freight matching sites. Motor carriers wishing to find freight, get fuel advances, and receive 100% payment on delivery will find they no longer need an outside factoring company—because they can find all those things at FreeFreightSearch.com without ever leaving the site. Optional funding memberships are also 100% free, and require about two days to set up. With a funding membership on FreeFreightSearch.com, a motor carrier never incurs a cost unless they obtain a fuel advance or quick pay from us on a posted load. There’s no start-up cost, no membership fee, no minimums, no factoring reserve, and no exit fee. In short, FreeFreightSearch.com is a one-stop for finding quick paying freight, getting fuel money, and getting paid 100% on delivery.
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 our Carrier Payment Guarantee on Platinum Broker credit reports.