Every broker knows that keeping a close eye on your cash flow is an essential piece of the business. Without careful monitoring, it’s easy to let costs balloon out of control and for economic forces to have their way with your business.
A Profit and Loss (P&L) Statement is a tool used by brokerages of every size to monitor and understand the financial health of your business. This document may also be referred to as an income statement, and provides a clear snapshot of your company’s revenues and expenses over a specific period. This makes a P&L statement a vital tool to gauge your operations performance, make informed decisions, and plan for future growth.
Read on to learn how to put together a P&L.
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In this uncertain economy it can be incredibly tempting for brokers to resort to non-recourse freight factoring to remove risk from their business.
While non-recourse factoring may sound like a great deal - putting your factoring company on the hook in the case of customer default, it also comes with a significant increase in expenses, fees, and restrictions on your business and clients.
In this article, we’ll explore the best alternatives to non-recourse freight factoring that you can implement in your business for 2024, so you can improve your cash flow, de-risk your business, and accelerate your growth.
Recourse factoring is essentially the same process as non-recourse factoring, where a broker sells their open invoices to a factoring company at a discount, and gets paid a percentage of the invoice value up-front. The big difference is that with recourse factoring, the broker maintains responsibility for collecting unpaid invoices.
When paired with other risk-mitigation strategies, recourse factoring is often less expensive and has fewer restrictions on your business than non-recourse factoring.
Most non-recourse factoring companies charge additional fees to compensate for the risks the factoring company is taking on. They also will run additional credit checks on your customers, and often only cover losses in the event of bankruptcy. These restrictions are reduced or removed entirely from recourse factoring agreements.
Want to find out more? We compare recourse vs. non-recourse factoring in detail here.
Invoice financing is very similar to factoring, with one distinct difference: You continue to own and be responsible for any invoices. Instead of being sold at a discount to a factoring company, these invoices are used as collateral for a short-term loan.
Invoice financing has several pros and cons: First, you maintain full control over your invoices and collections process, and don’t involve your customers in your financing. This also means lenders are less likely to perform credit checks on your customers - but they may have additional criteria that your business must meet before providing the loan.
Lines of credit are another popular option for brokers to use instead of non-recourse factoring. The advantages of lines of credit are similar to those of invoice financing and bank loans - they keep your customers out of the lending process, and your business qualifies based strictly on its own merits.
A line of credit can also be used for a variety of business needs beyond just paying carriers, such as financing expansion, hiring, and so on. The downside is that, in the current high-interest rate environment, lines of credit can get very expensive very fast.
In addition to the various credit checks and financial statements a bank may require, a LOC adds debt to your balance sheet and requires consistent long-term payments that may restrict your cash flow.
They’re also often much more cumbersome than factoring agreements - where you can be waiting weeks or months to access funds vs. 24-48 hours with factoring.
Here are some of the most important factors to consider when choosing between a line of credit and factoring:
Want to learn more? Download our Factoring vs. Line of Credit ebook here.
One alternative for well-funded brokers is self-financing. This method of financing requires brokers to have access to large cash reserves, but provides full control over your financing and avoids cumbersome loan repayments.
While there are some upsides to self-financing, there are also a few downsides. The most obvious is the amount of cash required to finance your operations consistently. Your team will also lack support for payables, meaning you’re on your own for options carriers love like QuickPay.
Brokers who self-finance may also find themselves running into a cash crunch if shippers consistently pay late, or during economic booms where your reserves don’t scale with demand. During large spikes in volume, you may find it difficult to consistently pay carriers quickly enough to keep them happy.
Similar to a line of credit, a broker may approach a bank, the government, or a private lender for a short or long-term loan to improve their cash reserves.
These loans often have more favorable terms than lines of credit, but often come with other restrictions and limitations. For example, SBA loans have specific size requirements, documentation requirements, restrictions on how funds can be used, and may not lend to you if you can get funding from other sources.
These loans may also require collateral, but do allow you to remove customers from the lending process similar to lines of credit and invoice financing.
Receivables insurance is a method of risk management that brokers may want to use in addition to some of the financing options above. This involves a business insurance policy that covers losses on a broker's receivables, up to a certain amount.
This can provide peace of mind to brokers who have many loads on the road, and want to avoid a catastrophic event that might impact their cash flow.
Unfortunately, there are also a few downsides. Receivables insurance isn’t cheap, and is an additional cost on top of any financing costs you may incur. These policies also often only cover catastrophic losses, and don’t provide any cash advances or support for your ongoing operations.
Regardless of the financing options you choose, we always recommend brokers implement risk-management strategies to maintain a healthy operation.
These strategies should be used in addition to financing options like factoring, and when properly implemented can be both more cost-effective and safer than non-recourse factoring.
Here are some of our top risk mitigation strategies for brokers:
With the implementation of these risk mitigation measures, most brokers find that they’re comfortable using full recourse factoring to finance their business because they’re more confident in their client base and business health.
As a broker, it may be tempting to use non-recourse financing to mitigate the potential risks of customer bankruptcy. In reality, there are significantly less expensive and more effective ways of de-risking your business while improving the financial profile of your company.
Alternatives such as recourse factoring, lines of credit or loans, self-funding, and more are all ways to improve your financial health with fewer fees, and can be less risky than non-recourse factoring when paired with risk mitigation strategies.
Want to learn more about how to improve your cash flow, get best-in-class finance tools and dashboards, and streamline your back-office operations? Click here to learn about factoring with Denim get started today.
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A line of credit has traditionally been the most appealing financing option for the logistics industry.
Until now.
Rate hikes by the Federal Reserve over the last three years have made it more challenging for businesses including freight brokers, fleets, and logistics companies to access affordable lines of credit.
In light of these tighter credit conditions, finding alternative financing solutions is crucial to ensure steady cash flow and remain competitive. Freight factoring emerges as a competitive option that offers more than just financing for logistics businesses.
The Federal Reserve (Fed) raised interest rates 11 times between March 2022 and July 2023 from a low 0.08% to a 21 year high of 5.5%. The goal of the hikes was to reduce inflation, however inflation remains higher than anticipated in 2024. As a result, the Fed plans to hold rates steady for now.
So what does this mean for you and your financing options? A lot.
The federal funds rate is the interest rate at which banks lend money to each other overnight. Higher federal funds rates make it more expensive for banks to borrow money from each other. As a result, banks usually pass on this increased cost to their customers by raising interest rates on various loans, including business lines of credit.
There are 3 major impacts that the increasing rates have on businesses applying for a line of credit.
The interest charged on a line of credit will depend on the prime rate and an additional percentage determined by the lender, known as the plus.
The prime rate is the interest rate commercial banks charge their most credit worthy customers. It is a benchmark for various types of loans. And the prime rate is influenced by, you guessed it, the federal funding rate.
Banks have been increasing prime rates as the Federal Reserve has increased their funding rates. Currently, the prime rate is 8.5%, up from 3.5% in April of 2022. Any new lines of credits opened today would be paying 142% more interest than two year ago.
The plus percentage added to the prime rate is determined by the lender and is based on your creditworthiness, business financials, collateral etc.
In our current high-interest rate environment, you face higher borrowing costs, affecting your cash flow and overall financial health.
Banks have become more cautious with their lending practices in response to a higher federal funds rate, making it more challenging for businesses to obtain a line of credit and secure favorable terms.
Due to increased risk perception, lenders are reducing the amount of credit they are willing to extend. The Federal Reserve Bank of Dallas surveyed 71 banks in March of 2023, and found a significant drop in lending. A smaller credit limit makes scaling your brokerage difficult.
Since banks are lending less money in this economy, they are imposing tighter requirements. You can expect requests for higher credit scores, robust financials, more collateral, and lower loan-to-value (LTV) ratios.
Even if your brokerage qualifies for a line of credit, you will still face stricter contract terms and conditions. Lenders may offer variable rates, shorter loan terms, impose additional fees or penalties. They may also include more restrictive covenants in loan agreements to manage the increased risks associated with high borrowing costs and protect their interests.
Variable interest rates appeal to borrowers when market interest rates are declining (like in 2020-2021). However, borrowers may face higher payments if market interest rates rise, making it more expensive to repay the loan.
Banks are more likely to offer variable rates in this market because the Fed will likely continue to increase rates until inflation stabilizes, likely by the end of 2024.
The variable interest rate is adjusted at regular intervals, such as monthly, quarterly, or annually. The loan agreement specifies the adjustment period and determines how frequently the interest rate can change.
Lines of credit with variable interest rates can involve more uncertainty than fixed-rate loans or financing options like factoring.
In today’s uncertain financial climate, factoring has become a more attractive and reliable option for trucking businesses seeking financing.
Freight factoring involves selling your accounts receivable to a factoring company in exchange for immediate cash. Funds are accessible without incurring debt, making it a more attractive option in any economy.
Unlike lines of credit, agreed upon factoring rates do not change based on market conditions. For example, a 3% factoring fee will remain the same regardless of whether the federal interest rates increase or decrease. Factoring rates are typically volume or time based and can vary between companies. But they remain consistent once established.
Freight factoring also provides several benefits, including quick access to cash, simplified approval processes, and no need for collateral, making it an accessible financing option in various market situations. Additionally, factoring companies offer support for your back-office operations in several ways.
The top five benefits of factoring include:
A common misconception is that factoring is restrictive and costly compared to a line of credit. However, this couldn’t be further from the truth at Denim.
Denim’s factoring solutions are among the most flexible and comprehensive in the industry, offering customizable carrier payments, invoicing, and collections. Client’s only pay for the capital they’re using at any given time, which mirrors the flexibility of a line of credit without the need to go through a bank.
With Denim’s factoring solutions, you are in control of your rate. Here are two ways you can influence your rate:
By leveraging these options, Denim clients can effectively manage their rates and only borrow what they need, ensuring cost-effective and flexible financing. Use our factoring calculator to see how you could save today!
This table provides a high-level comparison between factoring and lines of credit for your business. While factoring offers faster access to funds and additional support services, lines of credit may provide more flexibility in terms of fund usage.
Eliminating all other considerations, let’s take a look at the cost of factoring compared to interest on a line of credit.Let’s assume a freight brokerage is moving a $5,000 load with net-30 day payment and the carrier agrees to do it for $4,500.
Factoring at a 1% rate
If the factoring company charges a 1% factoring fee on the invoice total. We can calculate the factoring fee for this load as follows:
Factoring fee = $5,000 * 0.1
Factoring fee = $50
With factoring the freight broker would receive$5,000 - $4,500 - $50 (factoring fee) = $450
Line of Credit at 13%
(8% prime rate + 5%)
If the freight broker uses a line of credit with an interest rate of 13% to pay the carrier, the interest cost is calculated as follows:
Interest cost = Principal amount *(Interest rate per year / 365 days) * Number of days
Interest cost = $4,500 * (13% / 365) * 30
Interest cost = $47.88 (approximately)
The interest cost for the freight broker using a line of credit at 13% to pay the carrier $4,500 for 30 days would be approximately $47.88.
With the line of credit, the freight broker would receive:
$5,000 - $4,500 - $47.88 (interest cost) = $452.12
While the costs are within a few dollars of being the same, the major value add for brokers using factoring now over a line of credit is access to smart freight payment features through their factoring provider. Big banks do not have freight and logistics specialization and will never provide niche services like invoicing, collections, reporting, and carrier document collection. Factoring will always remain accessible regardless of credit score and the ideal route for freight companies to receive fast, reliable financing.
In the current economic climate, freight factoring and a line of credit have comparable borrowing costs. However, factoring is a more favorable and accessible financing solution.
Factoring offers several advantages, including faster approval times, more accessible eligibility criteria, and immediate access to cash upon selling invoices. Factoring companies also provide valuable services like invoicing and collections support, credit checks, and freight payment management.
Most importantly, factoring fees are not directly tied to interest rates. With Denim, factoring rates mirror a line of credit providing the flexibility businesses need to scale.
Securing a line of credit in a high-interest-rate environment can be more challenging due to stricter lending standards, reduced credit availability, and potentially unfavorable contract terms, such as variable interest rates.
Don’t let rising federal interest rates derail your freight brokerage’s success. Schedule a demo with Denim today and seize the opportunity for reliable funding to scale your brokerage.
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In a groundbreaking collaboration, MyCarrierPortal, a leading carrier identity platform, and Denim, a forward-thinking freight factoring partner, are excited to unveil a revolutionary partnership. This collaboration introduces a seamless onboarding process designed to simplify the experiences of carriers and brokers significantly.
The newly introduced feature is set to transform the landscape of carrier-broker interactions by streamlining the onboarding journey for carriers and enhancing broker efficiency. Clients of Denim who also use MyCarrierPortal can effortlessly extract information from the MCP platform to create detailed carrier profiles. With just a simple push of a button, brokers can request and receive updated ACH information and other critical updates, significantly improving the process's overall efficiency and user-friendliness.
What distinguishes this innovation is its immediate availability. The collaboration between MyCarrierPortal and Denim enables carriers to eliminate redundant data entry, fostering stronger and more collaborative relationships with brokers. This intuitive solution addresses a common industry pain point and is poised to reshape how carriers and brokers collaborate.
"Our joint efforts with Denim not only simplify the onboarding process for carriers but also enhance the overall broker experience," said Meg Boaz, Director of Business Development at MyCarrierPortal. "The ability to pull information and request updates with the push of a button sets a new standard for efficiency in our industry."
A key advantage of this collaboration is the commitment to continuous improvement. MyCarrierPortal and Denim are dedicated to swiftly enhancing communication and functionality, introducing features that distinguish them from other industry partners. They aim to stay at the forefront of innovation, ensuring their clients benefit from unparalleled, cutting-edge solutions.
"Strong relationships between carriers and brokers are essential for a well-functioning supply chain, but challenges often arise from inefficiencies and miscommunications," said Bharath Krishnamoorthy, Co-Founder and CEO of Denim. "The integration of Denim with MyCarrierPortal represents our initial step toward streamlining processes and reducing unnecessary paperwork. Our enthusiastic team is actively developing additional features aimed at simplifying and enhancing carrier-broker interactions."
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Growing a brokerage is hard, and most brokers know it’s important to maintain access to working capital through freight factoring to aid their growth. Yet one dreaded term will often cause brokers to stop in their tracks: the personal guarantee.
Freight brokers often shy away from signing personal guarantees because they see them as too risky, controversial, or limiting. While this can sometimes be the case, freight brokers can use personal guarantees to their advantage.
In this article we’ll review what personal guarantees are, the purpose they serve, why they matter, and how they can be a useful tool for many brokerages to get a leg up on the competition.
In the context of freight factoring, a personal guarantee is simply a promise made to the factoring company that they will be able to recover the advance provided to a brokerage. Factoring companies use personal guarantees as a way to ensure that funds that are lent out will be repaid.
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It’s essentially a backstop that a factor uses in the case of a broker’s customer refusing to pay an invoice or going bankrupt. Personal guarantees generally come in two forms, a limited guarantee and an unlimited guarantee.
Personal guarantees are terms that will be in the contract between a freight broker (borrower) and the factoring company (lender). These terms will be similar to other lending agreements between business borrowers and lenders, and are often used to secure credit when the borrower has a limited credit history.
Personal guarantees allow borrowers (in this case, the freight broker) to qualify for a line of credit that they otherwise normally would not qualify for or to secure a more favorable rate.
A guarantee in your contract may be under a variety of headings or clauses in your contract, such as:
These sections vary based on the factoring company and terms of the agreement. Consult an attorney for more information.
When a personal guarantee is made between a broker and a factoring company, the factoring company may run a credit check on the applicant (generally the business owner), in addition to checking the credit of the business itself. The lender may also ask the borrower to pledge personal assets such as checking or savings accounts, real estate, vehicles, etc. as collateral to secure the loan.
There are several reasons a business owner may need to sign a personal guarantee. Some of the most common scenarios are in new or small businesses that are still building up a solid credit history.
Many business owners also choose to sign an additional personal guarantee because it helps them secure more favorable rates or terms with the lender. These business owners are confident in the growth of their business and see personal guarantees as a low-risk way to improve their cash flow.
This tactic has even been used by some of the most famous business people in the world, such as former President Trump who personally guaranteed $421 million in debt.
According to a recent Small Business Credit Survey conducted by the Federal Reserve Banks, upwards of 59% of small businesses use a personal guarantee to secure funding.
Personal guarantees are incredibly common, and shouldn’t discourage brokers from engaging a factoring company.
The primary goal of personal guarantees is to protect the lender (factoring company) from bad actors. It’s incredibly easy these days to register an LLC, accumulate a significant amount of unsecured debt, and then declare bankruptcy leaving the lenders without any recourse.
Providing credit to new and small businesses carries significant risk for the lender, and personal guarantees are a common way to mitigate that risk, and in turn offer lower rates to clients.
Without personal guarantees, lending rates would skyrocket and eat into the broker's cash flow, creating a lose-lose situation for everyone involved. When freight factoring companies like Denim can limit this risk through a personal guarantee or collateral, brokers can secure significantly better rates, improve their cash flow, and maintain healthy lending relationships.
The vast majority of brokers should not be concerned about providing a personal guarantee to freight factoring companies.
If you’re doing your best to run a healthy business and believe in your company and your clients, then you have little to worry about. Personal guarantees are rarely called upon, and usually only as a last resort due to extreme cases like fraud, gross mismanagement, or a broker’s entire client base going out of business.
The best way to ensure your business isn’t one of these rare edge cases is to continuously diversify your portfolio of clients. The freight brokers at the highest risk are those who depend on one or two large customers for the majority of their business.
Diversifying your client base will eliminate the vast majority of scenarios where personal guarantees would be called upon.
There are a few alternatives to personal guarantees that are less common but still provide some protection for the lender and borrower. These can include validity agreements, credit insurance, or other types of collateral to secure the loan.
These alternatives have varying levels of protection, requirements, and pros and cons. For example, credit insurance would protect a brokerage’s assets in the event of a default, but comes with additional costs, fees, and credit checks.
Personal guarantees are often the least expensive way for both parties to secure a loan, meaning lower rates, fewer fees, and a smoother borrowing experience.
At Denim we specialize in freight factoring for freight brokers and fleets, and we do require personal guarantees in our contracts. Personal guarantees are a standard practice in the industry, and are required by most freight factoring companies.
Using personal guarantees to secure loans allows us to offer some of the lowest rates in the industry, even to brokers with little to no credit history.
These guarantees may seem daunting, but they’re a fundamental part of lending and borrowing in the freight industry where cash flow is king.
For freight brokers, embracing personal guarantees can open the doors to better rates, stronger relationships with your factoring company, and a clear path for growth.
If you’re ready to get started on improving your cash flow, building your business, and streamlining your financial operations, click here to speak with our team and start factoring today.
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Las Vegas recently hosted the Manifest: Future of Supply Chain 2024, a spectacle of innovation that transformed the desert landscape into a melting pot of supply chain evolution.
With over 4,500 attendees, including 1,500 shippers, the event was not just a gathering but a bold statement on the future of logistics and supply chain management.
We attended for our second year and had the opportunity to meet with many freight brokers and carriers, attend sessions, and network with partners.
From our conversations, we took away three trends:
Consumer expectations are being felt from top to bottom of the supply chain. And Amazon is setting a high benchmark to follow.
Amazon set a new standard by delivering a package in 15 minutes via drone in College Station from click to door. "Amazon has set the bar for customers, and we have to figure out how to meet it," said Itmar Zur, CEO & Co-Founder of Veho.
The ripple effect? Speed is now a basic expectation, reshaping the entire supply chain.
Farrukh Mahboob, CEO & Founder of PackageX, provided a solution: shippers must diversify their carrier mix. This approach aims to meet evolving customer demands.
Brokers and fleets use this as a selling point. Showcase your diverse carrier network and educate shippers on why they need various options at their fingertips. Speaking to shipper's customer needs is a sure way to make a lasting impression and provide more value to their business.
The industry is bleeding money due to insufficient data. The loss? A staggering $1.3 trillion, according to Sarah Barnes Humphrey, founder & host of Let’s Talk Supply Chain.
Getting data is only half of the problem, but molding it into actionable insights is where the real problem lies. Coby Nilsson, CEO & Co-Founder of Enveyo, said this was top of mind for his brokerage, "Getting data aggregated and digestible is something we are still working on."
When developing a successful data strategy for your organization, you must step back and reflect on potential blind spots hindering your progress. One helpful piece of advice from Cody, who is currently addressing this issue within his own company, is to begin. By taking that first step, you can better identify areas for improvement and start making positive changes towards a more effective data strategy.
Peter Coratola Jr., CEO and president of EASE Logistics, added the importance of technology and internal processes. "The problem is workplace adoption inside our walls. The key is to keep it simple and not let it get in the way of customer experience."
An easy way to encourage adoption and ensure data is moving smoothly across your technology stack is to only work with providers with an open API or integrate with your customer technology stack. Solutions that mesh seamlessly are not just nice to have; they're essential for survival.
In 2024, many brokerages and fleets are looking to grow their businesses. However, they face a significant challenge due to cash flow issues. The problem arises when they must pay carriers while waiting for payments from shippers. Factoring emerges as a viable solution to overcome this challenge. It helps support growth and ensures that carriers are paid on time.
According to Lexi Farris, Senior Sales Manager at Denim, business owners' perception of factoring has changed recently. In the past, factoring was considered a "dirty word," but now, several brokerages and fleets explicitly ask for factoring. Business owners have realized the benefits of factoring in this market. Farris believes that a healthy cash flow is essential for growing and sustaining momentum in business.
The logistics industry embraces factoring as an emerging trend, and more businesses recognize its value. Leveraging factoring has proven to boost a company's ability to take on new projects by ensuring steady cash flow.
According to Itmar, "2024 will be the biggest year of the supply chain. The last two years have been all about cost reduction. Those that will win are marrying cost with customer experience. Winners will start to emerge as the economy starts to shift."
We're really excited about what this means for all of us. Providing the best customer experience is a cost worth investing in. Businesses that get this balance right are the ones we'll be talking about next year.
We believe this is the perfect time to think about how your business can jump on this opportunity. That's where factoring comes in. It's like a superpower for your cash flow, giving you the flexibility to invest in what really matters – your customers and your growth.
Curious about how this works? Let's chat! Request a quote today, and let's explore how we can help supercharge your business growth.
So, here's to 2024 – a year full of potential. We can't wait to see where it takes us all. Let's make it a great one, together!
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It’s no secret that the economy is uncertain at best, and many brokers are feeling the pain. With stories of shipping companies laying off large portions of their workforce or closing entirely, non-recourse factoring starts to sound like a pretty good deal.
Non-recourse factoring is a type of freight factoring where the factor takes on the responsibility of collecting debt in the event of default.
This sounds great for the broker, right? You get paid upfront for your invoices, and have no risk if the customer goes bankrupt.
However many brokers don’t realize that non-recourse debt factoring can add fees, limitations, and restraints to your growth.
In this article, we’ll review the pros and cons of non-recourse factoring, including some of the not-so-obvious downsides that most brokers miss.
On the surface level, non-recourse factoring sounds like a great deal for the broker: Brokers get paid upfront by the factoring company for their invoices, and the factoring company assumes all the risk if the customer doesn’t pay.
The truth is, the risk transfer isn’t total, even if you’re working with the best non-recourse factoring companies.
Many non-recourse factoring companies only cover a broker’s losses in the case of business closure or bankruptcy, and don’t cover the many other reasons a customer might not pay their invoices.
Some of the cases in which brokers are not protected by non-recourse factoring include:
On top of the many cases in which an invoice wouldn’t be covered by non-recourse factoring, these agreements also come with higher fees and costs for the broker. While factoring without recourse can reduce your risk, the increased costs may outweigh the benefits.
When comparing full recourse factoring and non-recourse factoring fees, non-recourse factoring often has rates that are 0.5%-1% higher than recourse factoring, which can have a noticeable impact on your cash flow. On top of that, non-recourse factoring often has additional fees such as:
With all of these extra costs, it’s no wonder that most brokers choose to use recourse factoring instead.
We’ve covered the fees, but there are some other not-so-obvious downsides to non-recourse factoring. Since the factor is taking on all of the risks of non-payment, they can dictate which clients they want to work with.
This means that brokers and carriers are often forced to work exclusively with highly reliable clients who have strong credit scores. Brokers may have to turn down clients who don’t meet the factor’s criteria, limiting their customer base.
On top of being unable to take every customer, non-recourse freight factoring also imposes restrictive credit limits which further restrict your business. These limits reduce the factoring company’s risk, but often mean a broker can only factor invoices from certain key accounts.
These restrictions limit a broker’s access to working capital and can increase your overall business risk. During uncertain economic times, improving your volume is one of the best ways to de-risk your business, and non-recourse factoring can prevent that.
Brokers often have long-standing and unique relationships with many of their clients, and take these relationships into account when choosing to do business with a particular customer. When a non-recourse factoring company becomes involved in the agreement, these relationships can be thrown out the window.
Most factoring companies will require additional documentation from your customers before taking on their invoices. These requirements can include additional credit checks, financial statements, and more. This can cause brokers to lose long-term clients they trust.
Factoring companies sometimes require minimum monthly volume commitments to avoid paying an additional fee. With full recourse factoring these volumes are usually small, and in some cases there are no monthly minimums at all. There might be certain revenue thresholds to qualify for factoring solutions. Search for a factoring company that offers selective factoring (like flexible factoring with Denim), so you can have control over which jobs you factor.
With non recourse freight factoring these minimums are higher, and so are the fees for not reaching them! This can put brokers in a tricky position: they feel forced to take on more clients or shipments to meet the minimums, but simultaneously have restrictions on their client base imposed by their factoring company.
Before committing to a factoring company, it’s important to understand all of the implications and fine print that can go into a non-recourse factoring agreement. These agreements can provide a safety net if a customer goes bankrupt, but come with burdensome restrictions and fees in exchange.
Most brokers understand that being in this business comes with some element of risk, and the risk of customer default is one of them. Brokers can mitigate these risks by performing credit checks on their customers, diversifying their customer base, and implementing a collections strategy. Using these tactics alongside recourse factoring can be just as effective as non-recourse factoring.
If you’re trying to grow your brokerage, it’s incredibly important to work with a financial partner whose goals are aligned with your own. Fees and limitations on your customer base are the last thing a growing brokerage needs.
At Denim we pride ourselves on providing financial solutions that enable your business to grow. Instead of the restrictions, fees, and limitations imposed by non-recourse factoring, we help brokers win more loads, save time and money, and streamline their operation.
Click here to learn more about how factoring with Denim can help your brokerage reduce costs, improve access to working capital, and grow your business.
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Managing a fleet means grappling with significant fuel costs. For truckers, fuel is the second highest expense following salaries. Fuel expenses can range between $50,000 to $70,000 per truck annually.
But there's a savvy way to handle these expenses: enter the world of fuel cards.
Fuel cards, or fleet cards, are specialized payment cards truckers use to buy diesel, DEF, and other fuels. Additionally, they offer fleet owners tools to manage and track fleet-related expenses efficiently. Beyond fuel, they often extend to vehicle maintenance and related costs.
These cards streamline payments while offering real-time insights into spending. They're essential for setting spending limits and simplifying International Fuel Tax Association (IFTA) reporting. Plus, they open the door to network-specific fuel discounts, saving significant money in the long run.
Fuel cards work similarly to business credit cards. You distribute them to your team, linking all their transactions to one company account. This setup puts you in charge of periodic payments like a regular credit card. However, most fuel cards tend to be charge cards rather than credit cards, which means the balance has to be paid in full on the due date.
The real game-changer is how these cards simplify expense management. They save you from the tedious task of tracking each employee's fuel and maintenance purchases. With features like expense tracking and reporting, these cards give you a comprehensive view of all on-road spending. They also come with added perks like fraud alerts and fuel discounts.
A fuel card can benefit your business in a variety of ways.
Depending on what you sign up for, you can take advantage of multiple perks, including:
Fuel cards and credit cards may seem similar when it comes to payment options, but they are different, particularly in terms of fleet management. Fuel cards are specifically associated with individual vehicles or drivers, providing fleet managers detailed information about each vehicle's fuel usage. You cannot obtain this level of detail with standard credit cards, which offer more general and less specific tracking of expenses.
Fuel cards provide better precision when it comes to spending controls. Managers can set specific spending limits and authorize purchases for particular types of products, such as fuel and maintenance. This differs from credit cards, which offer broader spending capabilities that can lead to less control over fleet expenses.
The fee structures of fuel cards are also more straightforward, usually involving fewer hidden costs and no interest charges. This simplicity is beneficial for fleet managers who need precise and predictable budgeting. Credit cards often come with various fees and interest charges, complicating financial management.
Additionally, fuel cards provide specific discounts based on purchase volume and loyalty to certain fuel networks, offering tangible cost savings for fleets. Credit cards typically do not provide this level of customization and savings.
Lastly, fuel cards have features specifically designed for fleet management, such as automated accounting and tools for simplifying IFTA record-keeping. These features make fuel cards a strategic asset for efficiently managing fleet expenses, offering advantages beyond regular credit cards' capabilities.
Selecting the right fuel card for your fleet involves considering factors like fleet size, usual routes, and vehicle types. Larger fleets may benefit from cards offering extensive network coverage and volume discounts, while smaller fleets prefer cards with lower fees and local network availability. Consider the geographical coverage that matches your fleet's routes and the specific benefits for the types of vehicles in your fleet.
When comparing fuel cards, look beyond the network and discounts. Assess fees, credit terms, and additional services like maintenance discounts or roadside assistance. The ideal fuel card aligns with your fleet's operational needs and financial objectives.
Integrating fuel cards with fleet management systems streamlines operations by automatically recording fuel transactions. This integration provides real-time insights into fuel usage, simplifies expense tracking, and reduces administrative tasks. It eliminates manual data entry and minimizes errors, allowing fleet managers to identify fuel usage patterns and potential issues quickly.
This integration also eases reporting and compliance, particularly for IFTA reporting, by offering accurate and accessible data. It can help identify areas for improvement, like route optimization or driver training for better fuel efficiency. In today's digital landscape, integrating fuel cards with management systems enhances fleet management efficiency, offering cost savings and improved fleet performance.
Streamline your fleet management with the Denim Fuel Card. Say goodbye to fuel fraud and lack of control, and say hello to fuel discounts up to 84¢/gal. Denim combines tech-forward factoring with fuel optimization solutions going far beyond traditional rebates.
Manage payments, fueling expenses, and accounting all within the Denim platform. With the seamless workflow between Denim and your fuel card, fleets can leverage their Denim funds to send real-time payments to manage expenses. From there, fleets can access a self-serve portal to keep fleet finances at their fingertips - track spending, set card limits and controls, block fraudulent transactions, save on fuel and non-fuel expenses, and more.
The Denim Fuel Card isn't just another card; it's fuel for financial flexibility, business credit growth, and an improved bottom line. Welcome to a future where your fleet operates at its peak potential.
Apply for the Denim Fuel Card and start saving today!
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FreightZap decided against outside investments to maintain its independence and control. However, as a rapidly expanding freight brokerage, it was essential for them to have positive cash flow and liquidity to achieve their business goals.
FreightZap was not interested in bank loans due to the onerous terms and high-interest rates. Instead, they chose factoring as their ideal solution.
FreightZap switched from a previous vendor and opted for Denim's flexible factoring solutions. With Denim, FreightZap found a factoring partner aligned with their desire for autonomy and financial efficiency.
Key takeaways from the FreightZap and Denim partnership include:
In 2023, Roderick joined FreightZap during a period of rapid growth for the brokerage. With 22 years of experience of transportation and supply chain leadership, Roderick leads FreightZap's sales, marketing, strategy, and administration efforts. He joined the company because he believes in its mission to provide the highest quality service.
FreightZap prides itself on focusing intently on geography, market type, and mode specialization. According to Roderick, the company's team of fewer than 15 employees emphasizes operational excellence and aims to be more than just a service provider. They strive to be partners who understand their client's business, values, and goals, serving as advisors and operational executors.
Thanks to this mission, FreightZap has a loyal customer base with no customer churn.
"We are partners strategically, so we have not focused on transactional relationships and value but the deep, strategic, long-term value that will create competitive moats for our employees, customers, carriers, and other trade partners."
Despite its operational success, FreightZap faced challenges in finding financial solutions tailored to its unique businesses across its service lines which demand responsiveness measured in minutes, compliance and risk management solutions, and ultimately deliver value in making our customer and our customer’s customer better. Ensuring appropriate liquidity as an organization was paramount to FreightZap's growth plan.
"We have not and will not accept investor money as we do not want to sacrifice profits for our purpose, employees, or customers."
Factoring was the answer. However, FreightZap wanted a flexible solution that integrated into their technology stack. FreightZap considers technology essential "given our ability to provide leading compliance, transparency, and information." An integration into their current TMS was crucial.
This gap led them to seek a financial partner that could offer more personalized support and seamlessly integrate into their technology stack.
Their search for a suitable partner led them to Denim, a tech-forward freight factoring company. What stood out about Denim was its ability to offer a more personal touch. "Being a smaller and newer organization themselves, we felt that Denim was hungry and competitive for our business," Roderick notes.
The deciding factor was Denim's integration capabilities with FreightZap's TMS, facilitating seamless data communication and reducing administrative overhead.
The partnership with Denim has brought significant advantages to FreightZap, which is essential for a growing brokerage in a competitive industry. The benefits can be distilled into three key areas:
FreightZap has seen a notable 15% improvement in operational efficiency since integrating Denim's solutions. "The way you've streamlined our processes is remarkable," Roderick notes.
Efficiency is critical for a growing brokerage. Denim's easy-to-use interface and analytics dashboard support FreightZap's fast decision-making. In logistics, decision-making speed can be the difference between securing a deal or missing an opportunity.
The time saved is not just a matter of hours but also of strategic value, allowing FreightZap to focus more on business development and client relationships.
"We've experienced a significant reduction in administrative overhead, and our team can now focus on what truly matters: building and nurturing relationships with customers, carriers, and trade partners and providing exemplary service."
Maintaining liquidity is vital for a growing business like FreightZap. Denim's flexible financing options have enabled FreightZap to manage its cash flow more effectively, ensuring they have the financial resources to seize new opportunities and invest in growth initiatives.
Unlike bank loans with onerous terms at times, freight factoring with Denim enabled FreightZap to choose which invoices to factor. With next-day funding, FreightZap had the cash to invest as they saw fit.
"It comforts us that we can go outside the box with customers, solutions, and terms and have a financing partner to support execution."
This aspect of Denim's service is essential for FreightZap, as they have chosen to grow without external investor funding, relying instead on their revenue and factoring services like those provided by Denim.
Denim's focus on technology has been a key advantage for FreightZap. "Denim's commitment to embracing, optimizing, and continuously working with us for better technological functionality has been a key differentiator," a FreightZap representative remarks. Their integration with various systems through APIs will give them a significant competitive edge by boosting data accuracy and real-time communication.
Denim's dedication to customer support and ongoing platform improvements has greatly benefited FreightZap.
"Whenever we've encountered challenges or had specific needs, your responsive team has always been there to assist," they note. This support ensures smooth operations and allows FreightZap to focus on its core business.
Overall, Denim's advanced technology and customer service significantly enhance FreightZap's competitiveness in the industry, helping them stay ahead in a dynamic market.
The partnership with Denim has positively influenced FreightZap's growth and strategic direction. With Denim's backing, FreightZap is well-equipped to pursue innovative strategies and maintain its competitive edge in the freight brokerage market.
"Bigger is not always better. Banks have onerous terms at times, and investors can change your strategy. If you want to control your destiny, factoring with Denim is a great option."
If you're a freight brokerage looking to streamline your operations and manage finances more effectively, schedule a call with Denim today. Receive a demo and learn how our innovative solutions can propel your business forward, just as they have done for FreightZap.
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