The current freight market is one of the worst in history. Tender rejections have dropped to a record low of 2.53%; the previous record was during the COVID lockdowns at 2.57%. 

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However, we know the market will turn, and this slow time will be a distant memory.

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Until that day comes, staying on top of your finances is more important than ever. Maintaining cash reserves for carrier payment and payroll is essential to surviving any downturn. 

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Freight factoring can be one of the tools in your toolbox to weather a slow market. It allows you to access capital when you need it, giving you opportunities to take advantage of spikes in demand.

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There are some obvious benefits of freight bill factoring, especially for established brokerages looking to expand their business. It improves overall cash flow by providing quick access to cash that the broker would otherwise have to pay out of pocket to their carriers. This of course keeps carriers happy, on the road, and delivering reliably. 

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Some benefits of freight factoring are easy to see, while others are less obvious. These less visible benefits are just as important. 

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6 Freight Factoring Benefits 

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1. Liquid Capital Reserves: Freight invoice factoring ensures swift access to cash which otherwise would be tied up in carrier payouts. This frees up your cash reserves to scale or reinvest as you see fit. 

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2. Lowering Days to Pay and Enhancing Credit Score: With freight bill factoring, your carrier payments are prompt and on-time, which significantly reduces your days-to-pay ratio. A lower days-to-pay ratio can improve your brokerage's credit score, making your business more attractive to carriers. 

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3. Credit Checks to Mitigate Risk: Factoring companies for freight brokers provide credit checks on customers so you can feel confident taking new contracts. Ensuring the financial reliability of your customers safeguards your brokerage against unnecessary financial risks like non-payment or payment delays.‍

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4. Avoid High-Interest Business Loans: By leveraging freight factoring, you can avoid the need for high-interest business loans to finance operations. Unlike traditional loans, freight bill factoring is not debt - it's simply an advance on what you're already owed. Plus, freight factoring rates are not tied to the Fed, but instead your volume. ‍

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5. Working Capital for Operational Growth: Freight factoring can provide the working capital necessary to run and grow your brokerage. Turning invoices into immediate cash gives you the financial flexibility to invest in technology, hire more staff, or expand your marketing efforts. All are essential elements for business growth.

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6. Automated Carrier Payments for Improved Relationships: Freight broker factoring companies offer quickpay, ensuring on-time and reliable timely carrier payments. The result? Improved relationships with your carriers, fostering loyalty and reliability. Don't take our word for it, read Direct Expedite's testimonial.

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Weathering Economic Uncertainty with Freight Factoring Benefits

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Navigating the volatile freight climate demands a secure financial foothold. Economic downturns and demand spikes require a strong financial strategy, and freight factoring shines. It provides quick access to cash, fast carrier payments, and improved cash flow.

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There are more benefits of freight factoring than meets the eye. It paves the way for business growth by preserving capital. Freight factoring enhances your credit score by reducing your days-to-pay ratio. Freight factoring allows credit checks, significantly reducing the risk of non-payments. These often overlooked advantages can make a substantial difference in driving the success of your brokerage.

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By harnessing the full range of benefits that freight factoring offers, you're fortifying your brokerage against economic downturns and strategically positioning it for enduring growth and success.

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The 2023 Transportation Intermediaries Association (TIA) Capital Ideas Conference brought together the nation's leading freight brokers for a four-day event in Orlando, FL. Our Denim team attended for the first time and was among the approximately 2,000 attendees. The agenda promised and delivered education, networking, and insightful discussions.

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We were thrilled to reconnect with many growing freight brokers we met last year, in addition to establishing new relationships. The mood was very positive despite the difficulties the industry is currently facing. The show of strength and perseverance of the freight brokerage community was inspiring.

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Let's dive into a few of the highlights.

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Pioneering Panels and Informative Discussions

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TIA’s First-Ever Ports Panel 

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A dedicated ports panel was a conference first. Adam Angle was in charge of the discussion, which included East Coast Ports personnel Byron Miller, John Petrino, and Robert Peek.

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The conversation centered around the intense pressure on the West Coast ports during the pandemic. Many TIA members faced disruption, prompting a shift of traffic to these East Coast ports. 

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Panelists discussed the ports' future growth ambitions and strategies for TIA members to enhance their business through port relationships.

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Congressional Outlook Discussion 

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Congresswoman Kat Cammack joined TIA's Vice President of Government Affairs, Chris Burroughs, to address the supply chain and infrastructure projects in the U.S. They discussed the outlook for the 118th Congress and several key legislative initiatives. 

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Addressing Industry Challenges: Fraud in the Supply Chain

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A burning issue that the conference addressed was the escalating incidents of fraud within the supply chain.

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On the conference's concluding day, a panel discussion on double brokering  brought industry experts together. The panel included Chris Burrough from TIA; Garrett Wolf from TriumphPay; Kenneth Lund from Allen Lund Co.; and John Miller from Plain Dedicated.

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Kenneth Lund sounded the alarm on double brokering. He shared that "fraud had seen a staggering 300% increase over the last three months." 

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The panel emphasized the importance of direct communication with drivers as a potent strategy for combating double brokering. Lund stressed the value of this approach, stating, “Ask to talk to the driver. And if they say no, that’s a red flag.” This straightforward yet effective tactic can be essential in detecting potential fraud.

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John Miller highlighted the necessity of a holistic approach in the battle against fraud and double brokering. He advised the audience to instill vigilance in their entire teams for driver verification, not confining this responsibility to carriers or dispatchers alone. “Ensure your clerical staff, the night dispatcher, and your entire team realizes the importance of verifying the driver,” he reinforced.

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The panel discussion also underscored the FMCSA's lack of enforcement, which has resulted in approximately $700 million in fraudulent activity, as a crucial concern. The session emphasized the immediate need for industry-wide measures to address this alarming issue.

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Looking Forward to TIA Technovations Conference

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With the TIA 2023 Capital Ideas Conference behind us, we're already looking ahead. The insights, strategies, and discussions that took place have further fueled our drive to continue innovating freight payments.

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The Tech Innovation Convergence in San Diego is set to offer more invaluable knowledge and networking opportunities. We're excited about what's to come and can't wait to continue the conversations that started in Orlando.

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Until then, we remain committed to supporting freight brokerages and logistics companies with easy-to-use freight payments system and flexible factoring. We hope to see you at the next TIA events!

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With over three decades of experience leading high-growth companies in the freight and logistics industry, JJ Singh has a wealth of expertise from his time at prominent logistics firms like CH Robinson, Flying J, and Exxon Mobil. 

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Throughout his career, JJ has developed a deep understanding of the challenges that persist in the supply chain. His passion for solving complex problems through cutting-edge technology led him to launch EKA TMS.

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EKA: Addressing Critical Challenges in the Freight and Logistics Industry

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EKA was established in 2017 to address the urgent problems of digitization and fragmentation in the freight and logistics industry. Over 3.5 million transportation and warehouse businesses are affected by these challenges, resulting in a fragile supply chain. With more than 50% of carriers, brokers, and shippers still using spreadsheets and duplicate entries, EKA aims to transform the industry through streamlined processes and reduced inefficiencies.

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Empowering Logistics Businesses of All Sizes 

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EKA's solutions are designed to help small and medium-sized broker, carrier, and shipper businesses operate efficiently from quote-to-cash. Their affordable, best-in-class digital tools enable higher performance, meeting the demands of tomorrow's supply chain.

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EKA offers four cloud-based SaaS platforms for its customers:

• EKA Omni-TMS® Platform for Brokers
• EKA Omni-TMS™ for Carriers
• EKA Omni-TMS® Platform for Shippers
• EKA-Mplace® Platform 

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Additionally, EKA provides cargo insurance solutions in partnership with Redkik and Lockton Company.

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Why Choose EKA?

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Selecting a Transportation Management System (TMS) is a critical decision for logistics companies. EKA's TMS is an intuitive, affordable solution that offers a high degree of automation (90%), enhancing productivity for brokers, dispatchers, and accounting staff.

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The solutions offered by EKA are designed to help businesses expand by accommodating annual revenues between $1 million and $75 million for carriers and brokers. Its efficiency enables a broker to manage up to 13 loads per workday and a 40-truck fleet to double its size without significantly increasing operations personnel.

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Furthermore, the system facilitates seamless collaboration with trading partners and third-party service providers, streamlining communication and reducing delays. Renowned for its "best-in-class" customer service, EKA's TMS is an excellent choice for logistics companies seeking a solution to support growth and long-term success.

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Denim + EKA Partnership 

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JJ Singh explains that EKA chose Denim as a partner due to its remarkable entrepreneurial spirit and rapid growth. Denim consistently delivers best-in-class accounts receivable factoring and carrier payment solutions, ensuring a strong financial foundation for their mutual clients. Furthermore, Denim's commitment to customer-centric service aligns perfectly with EKA's values and vision, making them an ideal partner for a long-lasting and fruitful collaboration.

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The real-time API-driven integration between Denim and EKA has brought numerous benefits to both companies and their customers. By syncing jobs between the two platforms, the integration eliminates manual data entry and ensures accuracy in freight payment processing. This innovative approach has resonated with some of Denim's largest clients, who are empowered to efficiently manage their payments through the EKA-Denim integration. With hundreds of jobs moving seamlessly between the two systems daily, efficiency has skyrocketed, and clients are reaping the rewards.

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Advice to Freight Brokers Today 

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We asked JJ for his advice on today’s freight market and below is his advice:  

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1. Stay Relevant in a Competitive Market. To remain relevant in a down market, secure regular freight contracts even if margins are thin. The goal is to be the go-to choice when others falter, as clean-up freight can be more profitable.
2. Maintain High-Quality Service. Avoid working with questionable carriers, and prioritize clear communication, on-time service, and responsible problem management. By minimizing non-price costs, you can enhance the overall customer experience.
3. Leverage Technology for Efficiency. Invest in technology today to automate processes and save time in the future. As the cost of your time is lower now, take advantage of this opportunity to carefully select and implement technology before the next demand surge.
4. Invest in Your Team. Align, motivate, train, and strategically add to your team while also eliminating underperformers. Remember that indecision can lead to failure, so be proactive in managing your team.
5. Provide Solutions, Not Just Services. Rather than merely offering a truck and a price, sell a comprehensive experience. Describe your investment in technology, processes, and people that ensures you deliver on your promise to provide exceptional service.

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Are you an EKA client looking to up-level your payment infrastructure? Or perhaps you're a Denim customer in search of an integrated TMS solution that aligns with your business goals? Either way, the EKA-Denim integration offers a comprehensive, innovative solution that can transform your operations and set you on the path to success.

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‍Get in touch with us today to learn more about how the EKA-Denim integration can benefit your brokerage and help you stay ahead of the competition.

Most freight brokers have probably heard of the term “freight factoring” or “invoice factoring” before - but many aren’t quite sure how the process works, even if they use freight factoring themselves!

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If that’s you, don’t worry: you’re in the right place. 

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Properly utilizing freight factoring can be one of the easiest ways for freight brokerages to improve cash flow, operations, and maximize growth opportunities - and we’re here to show you exactly how to implement it in your business.

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It’s very common, and generally considered best practice, for small and medium brokerages to use freight factoring. Still, any factoring helps brokers avoid floating the difference between paying their carriers and receiving payment from client invoices out of their own pocket. 

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Factoring isn’t just used by small and medium-sized brokerages. In fact, 58% of all freight brokers use invoice factoring to manage their cash flow (1). Not only that, but the vast majority (71%) of freight brokerages with more than $2 million in monthly revenue use invoice factoring (1). 

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Want to learn why the best in the industry use freight factoring to manage their payments? You’ve come to the right place. Welcome to the Ultimate Guide to Freight Factoring.

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What is Freight Factoring?

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Freight factoring can be a confusing topic, especially when you’ve got a business to run and don’t have time to dive into the nitty gritty. It doesn’t help that several terms are often used interchangeably but can have different meanings depending on the context. 

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Freight factoring is essentially an easy way for freight brokers to get access to short-term funding by selling uncollected invoices to a factoring company. This helps brokers cover costs between the time they deliver goods to the customer and receive payment for that shipment. With invoices often being paid 60-90 days after they’re sent, factoring can be a godsend to brokers that need cash immediately to pay their drivers.
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In 2000, freight brokers managed just 6% of the trucking industry. By 2023, they were handling over 20% of all trucking freight. However, the freight recession that hit in 2023 has squeezed margins, with large players like Surge and Convoy going bankrupt. In this dynamic market, maximizing cash flow is crucial.

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After 17 months of falling rates, signs of stabilization are emerging. The Cass index indicates we may have hit bottom, and Landstar reported revenue per load increases in Q2 2024. With a possible market rebound on the horizon, freight brokers must strengthen their back-office and finances to handle new opportunities.

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Freight broker factoring is an easy way for brokers to collect cash upfront for all of their invoices, without waiting for 30, 60, or even 90 days for their customers to pay their invoices. This allows freight brokers to quickly and easily pay their carriers using QuickPay, and gives brokerages far more flexibility and reliability in their finances. 

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If you’re trying to grow your brokerage, freight factoring can give you access to the working capital you need to succeed in a competitive environment. Some factoring companies also help with automating your finances, invoicing, payments, and more - saving brokers many hours per week. 

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Freight factoring does have a cost associated with it, which is taken out of the final payment on your invoices. This is usually between 1-5% of the total invoice(4).

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Here’s a brief overview of how the process works:

1. First, your freight carrier delivers their load for the customer, obtains a signature, and sends the broker their invoice along with proof of delivery.
2. Next, the broker sends those documents, along with the shipper rate confirmation for the load to the factoring company.
3. Your factor will pay you an advance on this invoice - usually up to 90% of the invoice value upfront - allowing you to pay your carriers without floating the expense.
4. After the invoice has been collected by your Factor, they’ll pay the remainder of the invoice minus the factoring fee.

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History of Factoring And Supply Chain Management

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Freight factoring in one form or another has been around for a surprisingly long time. There are references to the financing of trade since ancient Babylon, which was written into law in the Code of Hammurabi back in 1755 BC (5).

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It’s likely that some form of freight factoring and short-term financing has been around for as long as trade and banking have existed. The needs of those who transport goods haven’t changed much in the thousands of years since - even if the speed of transportation and communication has. 

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Freight brokers back then needed ways to finance travel, new purchases, and other expenses while they waited for previous investments to pay off - just as they do today. This created a need for short-term financing, which has evolved into what we now know as freight factoring. 

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Freight factoring and supply chain management evolved as transportation and new methods of shipping goods evolved. 

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In early history the pyramids of Giza, built nearly 4,500 years ago, may be one of the earliest examples of a large supply chain (6).

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It wasn’t until nearly 2,000 years later, around 200 B.C., that long-distance and intercontinental supply chains were created, with early examples including the Silk Road and the Indian Ocean Spice Route (7).

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In the early 18th century, during the industrial revolution, larger, faster, and more reliable ships were created that quickly sped up global trade.

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Trade financing has evolved alongside the evolution of transportation and new methods of shipping. In the early 1920s, some shipping companies sold secured bonds to the public as a way to finance their endeavors and future investments. The expansion of production and new technology in the 1900s forced supply chains to improve quickly to meet demand.

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In the 1930s, RFID (radio-frequency identification) was invented first to track and identify friendly planes during World War II. The same system was later adapted to be rewritable, and started seeing wide commercial use in the 1970s - and is now used for tracking shipments, locks, credit cards, toll roads, and more (8). 

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The Japanese created what we currently know as “just-in-time” (JIT) inventory management, which was first developed by Toyota’s manufacturing plants (9). The process was so successful that it later inspired Lean Manufacturing in the U.S.(10), and has become widely adopted across the supply chain today.

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While some forms of supply chains and supply chain management have been around for hundreds of years, the term wasn’t widely used until the 1980s, when it was coined by Keith Oliver, a consultant at Booz Allen Hamilton(11).

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Modern financial institutions have allowed for significantly faster (and less expensive) financing, which has led to the explosion of modern shipping companies across the globe. 

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How Does Freight Factoring Work Today?

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In its modern form, freight factoring is in some ways still similar to ancient forms of lending. Freight brokers sell their invoices to a third party, who will provide upfront access to cash that the brokers need to pay their expenses. The factoring company will then collect on the invoice 30, 60, or 90 days later and collect a small fee when paying out the remainder of the invoice to the broker.

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This gives brokers access to financing to pay their carriers and other expenses almost immediately (sometimes within a day or two), without pulling on their own cash reserves to cover the costs while they wait for customers to pay the invoice.

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Most factoring companies will have several options for your invoice collections & payments, including recourse freight factoring, non-recourse freight factoring, QuickPay for your carriers, and more. These options provide brokers with freight financing flexibility depending on their needs and current demand.

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Benefits of Factoring for Your Freight Brokerage

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There are some pretty obvious benefits of factoring for brokerages, especially for growth brokers who are looking to expand their business. It provides quick access to cash that the broker would otherwise have to pay out of pocket to their carriers, ensures carriers are paid quickly, and improves overall cash flow. This of course keeps carriers happy, on the road, and delivering reliably. 

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On top of these more visible benefits, there are a few aspects of factoring that are incredibly beneficial to brokers, but aren’t apparent at first glance. 

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These include:

• Maintaining capital reserves so you can scale your brokerage faster.
• Lowering your days to pay - giving your carriers more reasons to stick with you, and incentivizing new carriers to join your brokerage.
• Improving your relationship with your carriers with QuickPay.
• Allowing you to perform credit checks on customers, removing some of the risks of non-payment or delayed payments.
• Avoiding expensive business loans to cover the float or finance operations. 
• Providing working capital to run and grow your brokerage.

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These benefits - along with some of the other financial tools some factoring companies provide - give much-needed flexibility and scalability to brokers who are looking to grow their businesses.

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What Does a Freight Factoring Company Do? 

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Your freight factoring company of choice can have a major impact on growing and scaling your brokerage. They’ll provide everything you need to get access to financing in the short and long term, and provide a myriad of other services and benefits if you choose the right one. 

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The freight factoring process is relatively straightforward - giving you access to cash upfront while your factor collects on your invoices when they’re due. Many factoring companies have slightly different processes, but the process generally includes the following steps.

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How Factoring Works:

1. First, your customers request a shipment, and oftentimes your factor will perform a credit check on the customer to ensure their load qualifies for factoring. This protects both the broker and factor, and reduces the risks of defaulted payments.

2. Your carrier will then deliver the shipment as usual, and your factoring company will likely require rate confirmations and signed proof of delivery. They will likely request shipper rate confirmation, carrier rate confirmation, and a carrier invoice along with proof of delivery. 

3. Your factor will then provide you with up to 90% of the face value of the invoice. The amount of your advance can be influenced by a variety of factors, such as the perceived risk of default. When factoring with Denim, you and your carrier are paid within 24 hours of sending the invoice.

4. Your factoring company will then collect on the invoice from your customer on your behalf, so you don’t need to chase down customers for payment or worry about covering carrier costs in the meantime.

5. When the invoice is collected, you’ll be paid the remaining value of the invoice, minus the freight factoring company’s fee. This is usually around 1-5% of the invoice (4).

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Other services provided by factoring companies:

1. Back-Office Support and Automation: Some factoring services provide back-office support and automation, streamlining your invoicing and payments process.
2. QuickPay for Carriers: With QuickPay factoring for freight brokers, your carriers get paid quickly without being charged a fee. This makes their lives easier, and makes them more likely to return.
3. Dedicated Account Management: Additional support and consultation to manage your finances is provided by some factoring services.
4. Free Credit Checks For Shippers: Some factoring providers perform free credit history checks into shippers, preventing unqualified customers from causing bottlenecks.
5. More Access to Working Capital: It’s important to have access to cash when you need it, especially during uncertain or competitive market conditions. During uncertain times, it’s important to have access to cash when you need it. Factoring companies can be a financial resource that will keep your operations running.

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Factoring companies like Denim can also be a smart solution for other financial needs - not only providing financing options that scale with your business, but the tools and automation needed to keep your business running efficiently.

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The Application Process and Terms

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While there is generally an application process to factor your invoices with a factoring company, it’s a relatively quick and easy process. Most companies approve applications within a day, and will often require significantly less information compared to other forms of financing. 

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How do you qualify? 

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Some factoring services require more than others, but there are generally a few criteria they’ll ask for or review when you apply. 

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This includes:

• Business Information: Your factoring company will likely require some basic business information from you, and will verify everything is correct and in good standing. This may include verifying existing assets or debts your business has during the underwriting process.
• Monthly Invoice Volume: The number of shipments you invoice customers for each month. Generally higher volume brokers will have better factoring rates.
• Customer Concentration: Some factoring companies see brokers with fewer customers as higher risk.
• Minimum Revenues: Some brokers require minimums to factor your invoices, while others such as Denim do not have any minimums.
• Background Check: Your factor may perform a company background check on your brokerage to ensure there aren’t any issues.
• Credit Rating or Liens: The credit rating of your business and any existing liens against your company may have some impact on your ability to receive financing or factor certain invoices. Your factoring company will likely perform a credit check to identify any of these issues.
• Personal Guarantees: To guarantee the best rate possible, factoring companies may require you to sign a personal guarantee. This is simply a promise to a factoring company that the will be able to recover the advance provided.

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Common Freight Bill and Factoring Invoice Terms to Know:

• Accounts Receivable: Unpaid money that customers owe you. 
• Factor: The factoring company you use.
• Factoring Rate: The percentage of the invoice which your factoring company is paid.
• Recourse Factoring: A method of financing where a broker will sell its unpaid invoices to a factoring company at a discounted rate, but are responsible for any customer defaults. Generally has a lower factoring fee and more flexible credit lines compared to non-recourse factoring.
• Non-recourse Factoring: Lowers the risk for brokers, putting all of the responsibility for collecting on invoices on the factoring company. The factoring service assumes the risk for unpaid invoices, but also will generally charge a higher fee. 
• Net Terms: The amount of time an invoice has to be paid.
• Advance Rate: The amount of advance the broker receives from their invoices from the factoring company. A lower advance rate may impact the factoring rate.

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Sample invoice: 

Factoring Rates 

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The rate you’re quoted for factoring can vary based on the type of agreement you have and other fees your factoring company may charge.

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Rates are generally determined based on the creditworthiness of your clients and your business, the volume of invoices you factor, current prime rates, and more depending on the factoring company you choose. Some offer tiered rate programs which decrease the rate you pay as your volume increases, while others tie rates to prime rates.

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Most factoring rates are between 1-5%(4), with rates increasing when brokers choose to use non-recourse factoring. These rates are the base factoring fee that your service provider charges, and may not be the only costs associated with factoring - more on this below. 

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Understanding the Fine Print and Hidden Costs

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When making a decision about a factoring company, be sure to read the fine print. Some will advertise low rates or risk-free financing, without being very upfront about their costs.

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Here are some important fees and requirements that are sometimes hidden in the fine print of factoring agreements: 

• Setup fees: A fee charged to begin working with a factoring company at the time of sign-up. Usually a one-time fee.
• ACH, Wire Transfer, or Check Processing Fees: Some factoring companies will charge a flat or percentage fee for each ACH transfer to your accounts.
• Minimum Volume Fee: Double-check that your factoring company won’t charge you if you don’t meet minimum volume requirements. These fees can quickly eat up the invoices of smaller brokers.‍
• Client's Credit Check Fee: A fee charged to check the creditworthiness of your customers - some charge for this and others do not.‍
• Aging Fees: Fees charged for invoices that take a longer time to be paid by your customers.‍
• Invoice prep &/or administration fees: Fees charged for preparing invoices, managing your account, etc.‍
• Length of Terms: The amount of time to pay on an invoice or contract.‍
• Termination Fee: A fee charged for early termination of your agreement.

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If a factoring company is charging any of the above fees, or has unfavorable terms like these in your contract, be wary of low advertised rates.They may have lower rates than alternatives, but will often eat up the value of your invoices through additional fees and restrictions.

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At Denim, we’re proud to offer clients factoring with no additional fees or long-term contracts. We know your business depends on knowing exactly how much you’ll receive from each invoice,  which is why the only fee we’ll ever charge is our base factoring fee. Schedule a demo to learn more.

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How to Choose the Right Factoring Company? 

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Choosing a factoring company is an important step to growing any brokerage, but it can be a challenging decision.

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At face value, low base rates and high advance rates are advertised to brokers, but there are a few other things to consider. 

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Here are the top questions freight brokers should ask before picking a factoring company:

1. How long and complicated is the application process to receive funding? 
2. How quickly are brokers and carriers paid after load delivery?
3. Do they offer QuickPay for carriers? Is it free?
4. Can you (the broker) choose which loads they want to factor?
5. Do they prioritize cybersecurity to ensure your funds are safe?
6. Are there any hidden costs, additional fees, or long-term commitments?
7. Does the Factor handle receivables and payment management?
8. Does the Factor offer Flexible Factoring?

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Check out this full list of essential questions every freight broker should be asking their factoring company. 

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Growth-focused brokers may also wish to consider the other financial services provided by a factoring company. Choosing a Factor that can scale alongside your business and provide other financial insights may be essential in future-proofing your company. According to KPMG, one of the largest consulting firms globally, investment in holistic supply chain technology will be an essential strategy in 2023 (12).

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This means that growth brokers looking to get ahead should focus on providers that incorporate more than just factoring into their services. Without end-to-end visibility into your analytics, customer credit, or back-office optimization, your brokerage may be left behind.

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What is the Difference Between Recourse and Non-Recourse Factoring?

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When entering into a factoring agreement, there are two common types of factoring you’ll encounter: Recourse Factoring and Non-Recourse factoring. These factoring types have some benefits and drawbacks that you may want to consider depending on your risk tolerance and financial situation.

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Recourse Factoring

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Recourse factoring is a form of freight bill factoring where the factor pays the broker upfront for any invoices, and then attempts to collect on those invoices when they’re due. This provides the broker with working capital to pay carriers fast, and the factor collects a fee for floating the difference. If the customer defaults on the debt, the broker is responsible for paying back the factoring company. 

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Full recourse factoring may seem riskier for the broker, but it does have several advantages over non-recourse factoring. The most important of which is a lower factoring fee - since the factoring company is taking on less risk, they’re able to charge less for factoring and pay brokers faster.

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Recourse factoring is also a great choice for brokers who have long-lasting relationships with their clients, and are aware of their payment history. If you already know your clients pay on time, recourse factoring is less expensive and gets you paid faster.

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Non-Recourse Factoring

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Non-recourse factoring means that the factoring company assumes the risk of default by the broker’s customers. While this sounds less risky on the surface, it does come with a few caveats. 

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Often brokers are only protected by non-recourse factoring in very specific situations such as the bankruptcy of the client. This can cause brokers to get the worst of both worlds: higher fees and responsibility for defaults that aren’t the result of bankruptcy. 

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Non-recourse factoring will also limit a broker’s customer base, since the factoring company is assuming all of the risk. This means they’ll frequently decline to factor invoices for customers who have less than perfect credit, leaving the broker on the hook. 

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Learn more about recourse vs. non-recourse factoring here.

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Factoring Discounts: Time & Volume

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What are Factoring Discounts?

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Factoring discounts are ways brokers can save on their rates, improve their cash flow, and adjust their funding based on their unique needs. There are generally two types of factoring discounts: time discounts and volume discounts.

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Some factoring companies may offer one or both of these discounts to their clients, depending on the number of invoices factored and the speed at which the client needs to be paid.

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Time-based factoring discounts reduce your rate based on how quickly your brokerage chooses to receive the advance for your invoices. These discounts offer a decreased rate to brokers who need a smaller amount of their invoices paid upfront. For brokerages that can delay the need for an advance on their invoices, time-based discounts can help cut down on fees if they don’t need the capital immediately. 

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Volume-based factoring discounts are decreases in your rate based on the volume of invoices your brokerage factors. These factoring discounts provide increased cash flow and a lower rate for larger brokers who process a lot of invoices.

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Factoring discounts give brokers some control over their rates and help reduce fees as your brokerage scales. Learn how you can save money on your factoring fees with Denim.

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Factoring Freight Broker Invoices vs. Other Funding Options 

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With freight factoring, your funding is based on goods that have already been sold and delivered. This allows factoring companies to provide an advance on your invoices for significantly lower rates than other kinds of financing.

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Business loans from the SBA have significantly higher rates, with a minimum of 2.25% + the prime rate, meaning a loan in early 2023 would cost you between 10-12%. A business line of credit can be even more costly depending on your creditworthiness, and can have rates as high as 16%-27% (13). 

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Compare this with freight factoring rates of 1-5%, and it becomes obvious why many brokers choose to factor over other methods of financing. 

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Factoring also won’t lock your business into monthly recurring payments like a bank loan or line of credit. 

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Loans from banks, the SBA, or private investors also often require some form of collateral. This could mean putting up your trucks, equipment, or office space as a guarantee against your loan. Since factoring is based on your existing invoices, generally no additional collateral is required, and approval is based on your customer’s creditworthiness, not yours. 

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Factoring also gives brokers an easy way to reduce debt on their balance sheet while simultaneously lowering their debt-to-equity ratio.

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Why Factoring is an Important Part of a Freight Broker’s Strategy in Both Up and Down Markets

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Smart brokers can take advantage of freight factoring in a wide range of markets, and it can be a useful tool to withstand economic turmoil. Easy and inexpensive access to funding can and should be a part of any broker's growth strategy, regardless of the economic climate. 

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Factoring in Down-Markets

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With the recent news of slowdowns in manufacturing, decreases in shipments, and trucking conditions falling to record lows, it’s more important than ever to stay on top of your finances. Maintaining cash reserves needed to manage carrier settlements and meet payroll is essential to surviving any downturn (14). 

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Factoring can be one of the tools in your toolbox to weather a recession. It allows you to access capital when you need it, giving you opportunities to take advantage of spikes of demand when they occur. 

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With most factoring companies there’s also no upfront cost or long-term commitment - you can sign up today, and only use it when you need it. Traditional forms of financing can lock brokers into fixed payments that might be challenging to keep up with if demand begins to slide. 

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During a downturn, it’s also important to consider your client’s reliability. Some factoring companies will perform credit checks and vet your clients to ensure they’re able to pay, and don’t have a history of defaulting on vendors. For example, at Denim we provide free unlimited credit checks for all customers, so you can be confident that invoices will be paid on time.

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Without a way to monitor customers’ history, some brokers can end up working with customers with a bad history of repayment. During an economic downturn, it’s critical that brokers work only with customers who are financially able to cover their obligations and pay their invoices on time.

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Factoring During Up Markets

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Easy access to capital is an essential tool for growing a freight brokerage during an up market, which is why freight factoring can be a useful tool when the economy is on an upward trend.

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Without access to capital, your business may not have enough cash on hand to capitalize on new demand as the economy improves. Consumers generally spend more during economic uptrends, which in turn means more goods need to be manufactured, shipped, and delivered to fulfill this demand. For example, in 2017 when the economy had been growing for several years in a row, the ATA trucking tonnage index rose by 3.7% - the largest annual gain since 2013 (15).

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The data clearly shows that when the economy is growing, so are trucking revenues. This is why it’s so important to have access to capital when needed. New customers are more likely to need new routes or additional deliveries from carriers during a growing economy. Without fast access to inexpensive capital, some brokers may lose this business to other more established 3PLs. 

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Freight factoring is one of the tools growth brokers should employ to remain competitive when the economy rebounds. With the right tools and access to funding, brokers can build and grow relationships with new carriers and customers during economic upswings. Easy access to funding also allows brokers to take on new jobs in niches they might otherwise avoid during downturns.

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The Benefits of Automating your Freight Factoring

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Factoring on its own has a wide range of benefits, which are compounded when used in conjunction with automation.

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Automation is quickly becoming an essential part of managing a broker’s back-office, and brokers that ignore these changes may be left behind by the competition (12). Carriers and clients are beginning to expect QuickPay, automatic payments, and prompt invoicing provided by automation.

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Automated factoring improves your company’s efficiency, allowing for streamlined invoicing, billing, and payment processing. This can significantly cut down on the time required to manage your accounts each week.

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With automated factoring and back-office support, your brokerage can expect:

• A Competitive Advantage: Automated freight factoring keeps your business ahead of the competition, providing more value and a better experience for clients, which in turn increases referrals and repeat business.
• Improved efficiency: Automating invoicing and payables streamlines the billing and payment process and significantly reduces the amount of time staff needs to spend on accounting.
• Enhanced accuracy: Manual invoicing and account management often leads to increased errors and inaccuracies. With an automated invoicing system, errors and inconsistencies in your data are automatically flagged. 
• Increased security: Automation reduces the risk of fraud, errors, and missed payments, which improves the security of your operation.
• Improved cash flow: Automated invoices and payments ensure that everything is on time and issued promptly, improving cash flow and operational efficiency.
• Improved relationships with clients and carriers: Carriers are beginning to expect QuickPay, and an automated back office ensures they get paid fast. This improves your relationships with carriers and customers, since checks and invoices are always accurate, on time, and easily understood. 
• Reduced administrative burden: Sending invoices, paying carriers, and managing your finances can be time-consuming and error-prone. With automation brokers often save many administrative hours each week, all while improving accuracy and efficiency.
• Align administrative costs with revenue: Factoring helps brokers remain lean and agile, allowing them to grow and scale quickly during up markets, and maintain solid margins without a bloated staff during down markets.

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The hours saved from automating your freight factoring will likely pay for the factoring fee on their own. Carriers, customers, and staff all benefit from the accuracy and efficiency of automated freight factoring, making it an easy decision for most brokers.

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Buyouts and Transitioning Freight Factoring Companies

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When a broker is considering changing from one freight factoring provider to another, they go through a process called a ‘buyout’. The process allows brokers to switch from one factoring company to another that better fits their needs, without losing access to funding in the short term. 

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If your current factoring company is charging excess fees, or doesn’t offer features like QuickPay or other financial enablement services, it might be time to consider switching to a new freight factor. 

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Here are some questions to consider if you’re thinking about transitioning to a new factoring service:

• Does your new factoring company offer better rates or terms? 
• Are there hidden fees or costs associated with your current factor that could be removed by switching?
• Will you experience improved customer service with the new factoring company?
• Does your current factor pay on time, every time?
• Are there terms in your contract, like volume minimums or aging fees, that make your current factoring company harder to work with?
• Does your factoring company use modern technology, automation, and easy-to-use reporting and dashboards? 

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Before switching factoring companies, you’ll want to review your existing contract and be aware of any cancellation fees, contract end dates, or other terms related to canceling your contract. 

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The Process of a Freight Factoring Buyout

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The buyout process can vary depending on who you choose for your new factoring company. At Denim we take care of the vast majority of the process on your behalf. After you’ve notified your previous factoring company that you’ll be canceling and agreed on a buyout date, Denim takes care of the rest. Here’s what the process looks like: 

1. Verify UCC filing and Initial Aging Report: Denim will contact your current factoring company to verify their UCC filing and request an initial aging report to ensure no outstanding liens or claims against your accounts receivable. Denim's operations team will also verify the aging report provided during the sales process by contacting your shippers to expedite the payment process and ensure a smooth transition.
2. Request final aging report and buyout agreement: We will request the final aging report from your current factor to confirm no additional loads were added to the accounts receivable. The final aging report is crucial to avoid discrepancies or disputes after the factoring buyout. The buyout agreement, which outlines the terms of the purchase and may take up to a week to process, will also be requested.
3. Sign Buyout Agreement: All three parties, including you, Denim, and your current factor, will sign the buyout agreement after careful review and understanding of all the terms.
4. Send the wire to complete the buyout: Denim will then prepare and send the wire to purchase all the open invoices, verifying receipt with your current factor.
5. Denim takes first place on UCC filing: The previous factor will send a release letter to replace their UCC filing, allowing Denim to take the first position by filing a UCC-1 financing statement. This final step completes the buyout.
6. Welcome Party!: Denim will introduce you to your new account manager and onboarding crew who will assist with integrating your account and provide a demo of your dashboard to kickstart your partnership.

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Conclusion

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Freight factoring is one of the easiest ways for brokers to get ahead, grow their business, and become known for fast and reliable payments, which is why it’s critical that you choose the right factoring company.

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At Denim, we’re proud to offer transparent, flexible factoring to brokerages of all sizes. You’ll never be surprised by your bill again with free account creation, applications, credit checks, ACH transfers, QuickPay, and more.

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Set up your free account today and only factor the invoices you need, when you need them. 

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Call (855) 250-4142 or sign up here to get started today.
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Additional Sources & References:

1. Denim: Freight Broker Pulse Report, 2022.
2. Freight Waves: SONAR monthly report, December 2022.
3. Allied Market Research: Freight Brokerage Market to Garner $90.7 Billion by 2031, August 30, 2022.
4. Freight Waves: Best Factoring Companies for Trucking, June 8, 2022.
5. Yale Law School: the Code of Hammurabi, n.d.
6. Technology And Engineering: Building the Pyramids, n.d.
7. The Globalist: A Brief History of Supply Chains, March 22, 2012.
8. RFID Journal: The History of RFID Technology, Jan 16, 2005.
9. University of Cambridge: JIT Just-in-Time manufacturing, n.d.
10. Strategos, Toyota Production System (TPS) & Lean, n.d.
11. Wikipedia: Keith Oliver, n.d.
12. KPMG: The supply chain trends shaking up 2023, n.d.
13. Bankrate: Best business lines of credit, February 2023.
14. Bharath Krishnamoorthy: Freight Broker Success in a Post-Covid Era, 2020.‍
15. American Trucking Associations: ATA Truck Tonnage Index Rose 3.7% in 2017, Jan 22, 2018.

The freight market remains in flux as we enter the second quarter of the year. While some indicators show positive growth, others reveal a decline, leading to mixed signals about the industry's outlook. 

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Inflation Slows Consumer Spending  

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Despite rate hikes by the Fed, inflation continues to be a headwind faced by the freight industry. Inflation pressures remain high with consumer price indices revealing a 6.0% YoY increase. It is felt the most in food prices, which increased by 9.5% YoY. 

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Overall, retail sales in the United States fell by 0.4% in February without adjusting for inflation. Furniture stores and food/drinking services sales were hit the hardest, with a 2.5% and 2.2% decrease respectively. 

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The decrease in sales of discretionary or bigger ticket purchases directly impacted freight movement, as consumers spent less overall. However, there was a slight increase in demand for the reefer sector, which includes food and health-related items. Freight brokers and logistics professionals may consider bidding on more reefer loads going into April.

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The Conference Board Consumer Confidence Index increased slightly in March to 104.2, up from 103.4 in February. However, the overall score remains lower than in 2022. A low score indicates consumers are more hesitant to buy goods, resulting in less freight movement. Freight brokers and logistics professionals should monitor consumer confidence trends to anticipate future demand better.

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Truckload Demand Increases but at the Slowest Pace in 5 Years

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According to recent industry reports, the freight market showed minimal growth in February going into March. 

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In February, truckload demand increased by 2.5%, the smallest tender volume increase in five years, and remained steady through March. The National Truckload Index (NTI) also fell by 5%, with a 3.8% decrease when excluding fuel costs, reflecting softened demand. 

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The softened demand can also be seen in rejection rates, which fell by 25 basis points in February, hovering just below 3.5% Carriers handled 25% more volume in late 2021 than they currently are. 

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One potential reason for the slower growth is the large carrier capacity available under contract, which is reducing shippers reliance on the spot market. As more shippers secure capacity under contract, there is less demand for spot rates, possibly driving the rates down.

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Seasonal Demand Shows Signs of Return 

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The analysts have been anticipating a return to seasonality in 2023, and the market is finally  starting to show signs of a soft return. Tender volumes were 2.7% higher in the first two weeks of March, signaling a slight seasonal rebound. 

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The oversupply of carriers persists leading to a continued fall in spot and contract rates. As a result, carriers may work harder to secure business and maintain profitability, and brokers may have to adjust their pricing strategies to remain competitive.

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As the produce and summer shopping seasons approach, volume should increase. Freight brokers can prepare for this soft return by building and maintaining relationships with their carrier networks. Brokers that offer fair rates to keep their carrier network on the road will reap the benefits when the market changes.  

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Cautiously Optimistic Freight Market 

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The freight market is slowly recovering but is not out of the woods yet. 

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With inflation pressures and hesitant consumers, it's essential for brokers to stay competitive and maintain their relationships to continue to weather the freight recession. 

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SmartBrokers are using this time to take a proactive approach that involves leveraging technology to streamline operations, achieving operational excellence to reduce costs, developing strong relationships with carriers and shippers, and having a growth mindset to identify opportunities for expansion. By embracing these strategies, smart brokers can position themselves for long-term success and thrive in difficult market conditions.

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Transitioning your freight brokerage to a new freight factoring company is easier than it seems. The freight factoring buyout is a process that allows freight brokers to switch their factoring company to one that better fits your needs. Switch to a better factoring company and say goodbye to poor customer service, high fees, late payments, or other challenges with your current factor. 

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Freight brokerages work with a freight broker factoring company to improve its cash flow and maintain its operations. As a freight brokerage, you may face long payment terms from your shippers, leading to cash flow problems and hindering your ability to grow your business. A freight factoring service can help alleviate cash flow challenges by purchasing your unpaid invoices and providing immediate cash advances.

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It’s important to remember not all freight factoring companies are the same. Brokers may have problems with their current factoring company, such as high fees, slow payments, and poor customer service. Any of these issues can damage your brokerage reputation and your business. Don’t let a lousy factoring company drive your business off track - it’s time to steer your brokerage in a better direction.  

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Why Switch Freight Factoring Companies in 2024? 

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We are currently experiencing one of the worst freight recessions in history, as volumes decreased by 15% in Q4 of 2023. This means that trucking companies need to evaluate their costs for efficiency, as an increase in demand is not expected anytime soon.

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If you're considering switching your freight factoring company, it's important to do so carefully. It's a bit like switching banks - it can be daunting, but it can pay off if done correctly.

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Factoring companies work with both clients and carriers, so any mistakes they make can reflect poorly on a broker's reputation. To avoid such issues, brokers should take the time to research and find the right partner. This way, they can focus on growing their business and building strong relationships with their clients and carriers.

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Remember, your factor is a core business component, so it's worth taking the time to find the best fit for your needs. When switching to a new factoring company, consider the following potential components.

Negotiate Better Rates and Terms 

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One of the primary reasons to switch your freight factoring service is to get better rates and terms.

Freight factoring companies negotiate rates based on volume and average days to pay. If your brokerage has increased volume, it’s time to re-evaluate and shop around for new rates. A lower factoring rate translates into better margins, which is especially important during a freight recession. Every dollar counts. 

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It's essential to remember that while comparing rates is smart, paying attention to the fine print and being aware of hidden costs is equally important. You want to avoid being surprised by wire transfer fees, collection fees, credit check fees, or any other unexpected expenses. While factoring companies can charge for additional services, ensuring transparency is crucial. A reputable factoring company should always disclose all potential charges upfront. However, it's ultimately up to you to carefully read the contract before signing. If you're switching factoring companies because of cost, compare similar services and uncover hidden fees.

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Additionally, some factoring companies have limiting contract terms like volume minimums, which can be detrimental during market swings. By switching companies, you can find a provider with more favorable terms that align with your business needs.

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Improved Customer Service

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Fast and responsive customer service can be the difference between paying your carriers on time or winning a lane. 

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As a freight brokerage, you should expect attentive, responsive, and expert help whenever you have issues, questions, or concerns. Your carriers and customers should also receive excellent treatment from the factoring company. When the factoring company collects funds from your client, the service should be exceptional - consistently professional and reliable.

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Suppose your current freight factoring company is slow to respond, unknowledgeable, or 

fails to fund your invoices within the agreed-upon time frame. In that case, it’s time to consider switching to a factoring company that values your business. A factoring company should treat you and your customers with patience, respect, and eagerness to go the extra mile to meet your needs.  

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Intuitive platform and advanced technology 

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Your freight factoring platform should not look like a 2000s website. User experience has come a long way since web 1.0; your factoring dashboards should reflect that.

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Freight brokerages are embracing freight technology in droves as more software companies have come to the market with intuitive and responsive platforms. The software you choose should have a sleek, clean, and easy-to-use interface that enables employees like Glenda in accounting to find what they need quickly. A well-designed platform will make Glenda a happier employee and free up her time to research new business opportunities. 

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Tech-forward factoring pairs financing with back-office automation to save brokerages time and headaches. Automation features like bulk uploads or two-way integrations with your TMS make invoices, payments, and recollections as easy as one click. 

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Strategic Alignment with your Business Goals 

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You want a factoring company that will scale with your business. Ideally, you want to switch factoring companies sparingly, as it could hurt your credit score and reputation. So finding a freight broker factor that will support your continued growth is paramount.   

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Shay Lynn Dixon of Scale Logistics chose to factor with Denim because she “knew the ‘old-school’ way of factoring wouldn’t work for her as a tech-savvy business owner.” 

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You can build a more substantial, sustainable business for years by partnering with a factoring company that shares your values.

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Preparing for the switch

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Switching to a new factoring company can seem daunting, but it can be a smooth process with careful preparation.

Start by reviewing your current contract with your existing factoring company. Take note of any cancellation fees, contract end dates, and terms. Ensure you have all the necessary documents, including an aging report and a copy of your contract. This preparation will help you avoid any surprises or delays later on.

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Next, identify the best factoring company. Do your research, read freight factoring company reviews on sites like Trustpilot, ask questions about their business, and ask for recommendations from other brokers. Request a demo of the software to get a feel for how it works and ensure it meets your and your team's needs.

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By taking the time to prepare and do your research, you can switch to a new factoring company with confidence and set your brokerage up for success.

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Steps to Switching Your Factoring Company 

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Good news: Deciding to switch is the hardest part of the process for you. The two freight factoring companies handle most of the buyout process. Your freight brokerage is only responsible for three easy steps: 

1. Notify the existing factoring company of your intention to cancel the contract and end date. Don't wait - often, there are 30 to 60-day notification periods. Cancellation must be in writing, typically over email. 
2. Log in to your current factoring company’s dashboard and pull the aging report. The aging report should show all outstanding invoices and status. Your new factoring company will use this aging report to vet your eligibility for a buyout and initiate the buyout.
3. Fill out your application for the new factoring company. 

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Kick up your feet and take a deep breath.

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Buyout Process with Denim 

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At Denim, we want to make the buyout process as easy as possible for our clients. We will handle most communication and coordination with your current factoring company.The Denim team will provide daily updates on the progress, so there are no surprises or unanswered questions.

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After you've notified your old factoring company and agreed on a buyout date, Denim will go to work for you. 

The steps Denim takes to complete a buyout:  

1. Denim will contact your existing factor to verify their UCC filing and request an initial aging report.

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A Uniform Commercial Code (UCC) filing is a legal notice that a creditor files to notify other parties that it has a security interest in a particular asset, such as accounts receivable. Factors take the first position to protect their investment. Denim needs to verify the UCC filing to ensure no outstanding liens or claims against your accounts receivable.

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Denim will request an aging report directly from your factoring company to verify the aging report originally provided in the sales process. 

2. Denim’s operations team will contact your shippers and verify the balance of every open invoice.

Contacting your shippers is vital to ensure a smooth transition to Denim. This step helps expedite the payment process and ensure you receive the funds you owe on time.

3. Request the final aging report from the existing factor and request the buyout agreement.  

We will request the final aging report to ensure your brokerage added no additional loads to the account receivable. A final aging report is necessary for both Denim and you. It helps avoid any discrepancies or disputes that arise after the factoring buyout.

The buyout agreement is a legal document that outlines the terms of the factoring buyout, including the purchase price and any other relevant terms. This process can take up to a week. 

4. All three parties will sign the buyout agreement.

The previous factors will initiate the buyout agreement because they are the party selling the accounts receivable. All three parties will sign the deal, including you, Denim, and your current factor. It is essential to review the buyout agreement carefully and understand all the terms before signing.

5. Denim will prep and send the wire to purchase all the open invoices and verify receipt

Once everything is verified, Denim will prepare and send the wire to purchase all the open invoices. Denim will verify the old factoring company received the wire. 

6. Send a letter of release to replace UCC filing and assign Denim first position.

The previous factor will send a release letter and permit Denim to terminate their UCC filing. Denim will then file a UCC-1 financing statement to take the first position. This step completes the buyout.

7. Welcome party!

Denim will introduce you to your new account manager and onboarding crew. This group will help step up your account with any integrations and give you a demo of your dashboard. 

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Denim Makes Switching Factoring Companies Easy 

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Switching factoring companies is smart for freight brokers with increased volume or looking for a better experience. But finding the right partner can be a challenge - after all, factors play a crucial role in interacting with clients and carriers, and any mistakes can have serious consequences for a broker's business.

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That's where Denim comes in. Our tech-forward factoring lets brokers enjoy smart automation tools and flexible factoring options without hidden fees or limiting contract terms. We offer some of the industry's lowest rates and the fastest turnaround on approvals, so you can keep your business running without any bumps in the road.

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Don't just take our word for it. Read how Yeti Logistics switched to Denim in just 3 days and saved nearly $20,000 in factoring fees.

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Selecting a factoring service is a daunting, but necessary task for freight brokers who need financing options.

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Not all factoring companies are created equal. Brokers need to know the right questions to ask when evaluating freight factoring services. And they need to understand the implications to ensure a beneficial partnership.

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Factors such as contract terms, fees, funding options, credit checks, and customer service are necessary to dig into before committing to a service.Understanding these questions can help freight brokers make informed decisions and avoid any unpleasant surprises or hidden costs down the road. It also helps ensure a healthy, long-term relationship with the factoring company.

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Questions to Ask Factoring Companies in 2024

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As we navigate through 2024, the freight brokering industry faces unprecedented challenges and opportunities. The rapidly evolving market conditions and the increasing importance of financial stability make it essential for freight brokers to scrutinize their financial partners more closely than ever.

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The recent bankruptcy liquidation of a Texas-based factoring company, reported by FreightWaves, serves as a potent reminder of the risks involved and the critical need for due diligence.

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This incident highlights not just the immediate impact on affected clients but also casts a long shadow over the perceptions of solvency within the factoring industry. In a year that promises growth amidst volatility, understanding the financial health of your factoring partners is paramount to ensuring operational continuity and seizing emerging opportunities.

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The landscape of 2024 demands a proactive approach to evaluating the solvency of factoring companies. Here are vital questions that freight brokers should consider:

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1. Where does the company's capital originate?

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Understanding the sources of a company's capital can shed light on its stability and reliability. A strong foundation of equity and secure debt indicates a resilient capital structure capable of supporting your needs.

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2. What is the monthly factoring volume?

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The monthly volume of factored invoices reflects the company's market presence and trustworthiness. A substantial and consistent volume suggests a healthy client base and operational robustness.

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3. Is there a cap on purchase amounts?

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Caps on purchase amounts can indicate the financial strength and flexibility of the factoring company. It's crucial to partner with a company that can accommodate your growth and factoring requirements without restrictive caps.

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4. What concentration limits are in place?

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Concentration limits reveal the company's risk management approach. While lower limits suggest a cautious strategy, offering stability, higher limits may provide more flexibility but at a potentially greater risk.

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General Questions to Ask Factoring Company’s (With Denim’s Answers)

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Outside solvency questions, you will want to ask your factoring company about their platform, processes and contract to get a better understanding of the potential partnership. Here are a few questions. 

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1. Do you have a webapp/user portal where I can view and manage my payments, or do I have to call in and talk to an account rep every time?

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Yes! Your Denim portal is available on any browser using your laptop, pc, or phone - 24/7, 365.  

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2. What are the 3 key benefits I will get from your service?

1. Time - Automations built specifically to simplify a freight broker’s day-to-day.
2. Transparency - Full visibility to your financial transactions, and clear communication for your customers and carriers when collecting invoices and making payments. 
3. Ease of Use - An essential piece of a modern freight broker tech stack, designed from the ground up with the freight broker in mind. 

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3. Are you a recourse or non-recourse factoring company?  What if a shipper fails to pay or files for bankruptcy? 

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We are a recourse-based company, and will handle your collections for 120 days. If we fail to collect from your customer (shipper) you will get a chargeback on day 90. The biggest way we protect your company while also protecting ourselves is by offering unlimited free credit checks - which must run credit before we approve a new customer of yours on the platform. In the event a customer of yours is denied, we provide a full transparency report on why. You are still more than welcome to run the  load at your own risk, we just won't finance it. 

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4. What is your factoring rate? 

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Our factoring rate depends on your volume and can range from 1-3%. To qualify for lower rates, your freight brokerage must meet certain thresholds in volume and or value of monthly factoring with Denim.

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5. How long does your 'quick pay' take to issue payment to carriers/truckers? 

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We offer QuickPay in 1-2 business days. If you upload an invoice on our dashboard by 12:00pm EST the payment is guaranteed the following business day. 

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6. Is there a minimum factoring fee per invoice? 

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No, there is no minimum factoring fee per invoice. You can upload a $200 invoice, a $2,000 invoice, or a $20,000 invoice all through the same system. 

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7. What is the minimum contract duration with your factoring company?

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Our standard agreement is one year.

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8. What is the termination notice period? And what is the termination fee? ‍

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Denim’s standard agreement begins with a 12-month term and renews annually. A 30-day notice is required to exit, and early termination incurs a fee of 10% of volume to cover administrative and UCC filing costs.

9. What is the ACH transaction fee? 

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We do not charge any ACH deposit fees. This is a free service for Denim users. 

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10. What is the daily cut off time for funding?

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Invoices submitted by 12:00pm EST are guaranteed a next business day  payment. Denim’s Quick Pay is between 1-2 business days. 

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11. What TMS programs is your company integrated with? 

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We offer direct integrations with AscendTMS, EZloader, Turvo, EKA, Zuum, Logistically, Port, Quote Factory, and TAI TMS.

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If there is a particular TMS you love working with feel free to let us know and we’ll work with you to build the integration. 

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12. Do you complete a credit check process for shippers? If so, is there a credit check fee? 

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Yes, we offer unlimited free credit checks for your shippers. No fees ever.  This is part of our robust customer validation support and services helping to protect our businesses from fraud. 

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13. Are there any hidden fees or charges? 

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No hidden fees and no additional charges for any of the features.

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14. Do you provide back-office automation and assistance? 

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Denim’s broker-first design makes day-to-day operations more efficient. Reduce incoming calls by providing carrier transparency with automated payment notifications. 

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Our TMS and QuickBooks integrations reduce time spent on tedious back-office activities,  freeing up staff to focus more on customer & carrier relationships.  

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15. Do we get a dedicated account manager? 

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Yes, every Denim customer is partnered with a dedicated account manager who will walk you through the dashboard,  answer any questions, and even help you upload your first invoice to prevent any payment delays. 

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16. Does Denim (or its subsidiaries) own any trucks? What about a freight brokerage license or  motor carrier license? 

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No. We are dedicated to providing customers with new and innovative technology that advances their business operations through automation and smart decision-making. 

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17. Do you provide fuel advances for carriers?

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No. 

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18. Do you provide EFS payment services? 

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No

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19. When will I see a copy of your notice of assignment and factoring contract? 

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These will both be included in a sample contract you will receive from an Account Executive during your registration process. 

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20. What happens if a carrier's payment is more than what Denim will advance? 

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We will always make sure your carrier gets paid in full first.  Denim cannot factor a job if the contracted carrier price exceeds the total load value, minus the fee based upon your factoring rate. 

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For example: 

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You are a Denim client with a factoring rate of 1.3% (you savvy negotiator you). You have a $10,000 load that needs to go from Dallas to Chattanooga. And you find a carrier that agrees to take the load for $9,500.    

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Denim will advance your carrier the full payment of $9,500 when you factor the load through our Freight Payment System. This leaves you with $500. At a 1.3% factoring rate, the cost to factor this load is $130. Remember - cost to factor the load is calculated based on the total load value.  

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After Denim receives the collections from your shipper, we take our fee of $130, and pass along the remaining $370 to you. This is your $370 profit, which is released on the subsequent Friday after the collection was made from the shipper. 

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A Freight Payment System (FPS) is a specialized tool for freight brokers that streamlines the process of paying carriers, credit checking customers, invoicing freight charges, and reconciling payments between shippers, carriers, and other parties involved in the transportation of goods. Freight Payment Systems are one of many key components to a robust freight tech stack. 

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The emergence of Freight Payment Systems has leveled the playing field for freight brokerages. Once the domain of only larger entities, Freight Payment Systems are now being used by freight brokers with a growth mindset – such as SmartBrokers – that need an integrated digital system to compete in today’s marketplace. 

Key functions of a Freight Payment System 

A FPS streamlines and automates manual tasks throughout the full life cycle of a load, including: 

• Customer credit checking
• Flexible financing options including factoring, cash, lines of credit 
• Invoice receipt and verification 
• Invoice audits 
• Carrier payments, scheduled based on term agreements and with a QuickPay option
• Detailed reporting on financial aspects of business

What are the benefits of a Freight Payment System?

Freight brokers with a growth mindset and eye on the continuous evolution of the logistics industry know how to intelligently leverage their FPS to optimize and streamline business operations. There are several benefits to using a FPS, including:

Improved carrier relationships

A carrier dashboard reduces the number of check calls a brokerage receives by enabling carriers to track the progress of their payments and ACH receipts. By providing accurate, timely payments to carriers, a FPS can help to improve relationships with these important partners.

Increased efficiency with automation 

Freight brokerages should be focused on building and maintaining relationships, not chasing down invoices and fielding daily (sometimes hourly) calls from carriers looking for payment. Automating manual financial tasks reduces the time and effort freight brokers spend on billing & invoicing, payment processing, and financial reporting. This helps businesses save time and money, and frees up resources to focus on other revenue-generating aspects of the business.

Enhanced business visibility and reporting 

Freight Payment Systems provide real-time information on financial transactions and balances, giving freight brokerages better visibility into the financial health of their business. With all financial transactions stored in one centralized location, it becomes easier to report on financial activity allowing for more efficient record-keeping, compliance reporting, and awareness of the health of the business. Freight brokers are able to  make more informed decisions about their business strategy and identify key areas for improvement.

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Integrated tech stack

Avoid switching between multiple systems, and make life easier on you and your team to track and manage data. Freight Payment Systems often integrate with other software solutions, such as accounting software and transportation management systems, to provide a more seamless experience for managing business tasks. .

Built-In security

Freight Payment Systems include robust security features to protect sensitive financial information and prevent unauthorized access. Brokers can store important data, such as carrier banking information, in a single location eliminating the security risks associated with maintaining this information in-house. Freight Payment Systems ensure the safety of financial data and a freight brokers’ book of business, and reduce the risk of fraud or other security breaches.

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Flexible financing options 

Freight Payment Systems provide flexibility to brokers when it comes to selecting the best financing option for each load. Freight brokerages can toggle between self-funding a load or factoring. When using a FPS, brokers are in full control of their finances without limiting terms and contracts. 

Who uses a Freight Payment System? 

Freight Payment Systems can benefit freight brokerages of all sizes whether they are managing 10 or 100,000 loads a month. 

Scaling freight brokerages on the cusp of hiring back-office staff, like accounting or invoice managers, are uniquely positioned to implement a FPS into their freight tech stack. A FPS can reduce the number of headcount needed to manage invoicing, payments, and manual document upload. Brokerages can instead redirect that employee headcount to revenue-generating roles and activities. 

How Long Does it Take to Implement a Freight Payment System?

Ultimately, it will depend on a freight brokerage's current technology stack, the number of loads and carriers, and the type of financing being used. 

Most Freight Payment Systems require an application including MC numbers, owner information, articles of incorporation, and banking setup to facilitate payments. The application can take 5-10 minutes. 

The application is then reviewed by the Freight Payment System for several factors including business liens, violent crimes, and active MC in good standing with FMCSA. This process can take 1 to 2 business days depending on when you send in the application. 

Once approved, freight brokers are invited to schedule a 30 minute call to set up the dashboard and walk through the first job submission. 

For larger freight brokerages looking to integrate their systems, it can take an additional 1-2 days to sync and populate the data across platforms. 

In all, implementing a FPS depends on the complexity of your technology stack and size of operations. Most freight brokerages can implement a FPS in under a week with little disruption to business. 

Freight Payment System: Your Key to Being a SmartBroker

As the logistics industry continues to adopt technology, a FPS is an essential tool for almost every freight broker. 

From enterprise freight brokerages to growth brokers, a FPS will help with: 

• Save time on manual processes with automation
• Reduce human errors and security risks
• Access to flexible financing from factoring to self funding 
• Financial reporting and business health visibility 
• Make data-driven decisions

If you are in the market for a FPS, a representative can walk you through Denim's platform and financing options. 

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SmartBroker

/smärtbrōkər//

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Noun

noun: SmartBroker; plural noun:SmartBrokers/SmartBrokerage

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Modern freight broker that makes use of advanced technologies and business practices

1. Freight expert with a growth mindset who implements the most advanced technology, develops the deepest relationships and pursues operational excellence.

“Those SmartBrokers are always outperforming the market."

2. A change agent who defines and embraces the wave of transformation in the logistics industry.

"The brokerages that will survive in 2023 are the SmartBrokers"

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The Supply Chain continues to evolve and new technologies are emerging every day challenging long-held standard operating procedures. Freight brokers need to stay up-to-date with industry trends and consider whether they are operating as efficiently and effectively as possible. Brokerages with a growth mindset are transitioning to a SmartBroker model in the face of unprecedented challenges within the freight and logistics industry. 

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What is a SmartBroker?

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A SmartBroker is a modern freight broker that makes use of advanced logistics technology and business practices.  They are experts with a growth mindset who leverage that tech for operational excellence - creating deep relationships. And they are comfortable with change, not only embracing the industry transformation, but actively pursuing it.

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SmartBrokers utilize advanced technologies and prioritize efficiency, transparency, and customer satisfaction within their operations. They leverage their tech stack to empower employees to be efficient through their daily tasks and operationalize these user-friendly platforms to allow shippers to easily work with their brokerage.  SmartBrokers use data analytics tools to optimize routes and negotiate the best rates with carriers, and may even find ways to use artificial intelligence to automate certain aspects of the booking and dispatch process. Oftentimes, SmartBrokers have a strong online presence, engaging, sharing and learning with the community on social channels and dedicated freight & logistics groups.  This is part of the growth-mindset that every SmartBroker has. 

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But SmartBrokers are more than just tech-savvy intermediaries. They also place a strong emphasis on effective communication with both their customers and carriers, ensuring that all parties have timely and accurate information throughout the shipping process. Rather than focusing on one-off transactions, SmartBrokers prioritize building long-term partnerships with both shippers and carriers.

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Shippers, now more than ever, are looking for reliable brokers to build long-term relationships with, and freight brokers who are quick to adopt this new methodology will be the ones who ultimately win out against those that fail to adopt and evolve.  And it's the SmartBroker, the modern, forward-thinking freight broker that utilizes advanced technologies and prioritizes efficiency, transparency, and customer satisfaction in their operations – that will win these shippers’ hearts. 

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SmartBrokers help increase efficiency and cost savings for their shipping customers by leveraging an intelligent logistics technology stack, with data analytics tools that help to optimize routes and negotiate the best rates with carriers. They also prioritize transparency, providing real-time updates and information to their clients and carriers, which helps to build trust and long-term partnerships. The goal of a SmartBroker is to deliver a seamless and efficient freight brokerage experience that exceeds the expectations of both their clients and carriers. (Easier said than done.)

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The Difference Between Traditional Brokers, Digital Brokers, and SmartBrokers

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All freight brokers, sometimes known as a third-party logistics provider or 3Pl, act as intermediaries between shippers and carriers, negotiating rates and arranging shipments on behalf of their clients. Freight brokers have a deep understanding of the transportation industry and are skilled at finding the best carriers for a particular shipment based on factors such as price, availability, and delivery time.

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SmartBrokers differentiate themselves from traditional brokers and digital marketplace brokerages as responsive and modern partners for shippers – offering an unparalleled customer service from blending new business technology with human professionalism. 

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Traditional freight brokers may not have the same level of technological capabilities or emphasis on carrier satisfaction. They may also be more rigid in their business practices and less adaptable to changing market conditions.  Traditional freight brokers have been around for many years and typically operate through a network of established relationships with carriers and shippers. They might rely on manual processes, such as phone calls and faxes, to communicate with their clients and carriers and negotiate rates.

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While digital marketplace brokerages like UberFreight have revolutionized the way that freight is booked and coordinated, they operate on a different model than traditional brokers. Digital marketplace brokerages act as facilitators, connecting shippers with carriers who have available capacity, but lack the traditional levels of human interaction and relationship building that is critical for long-term growth within the industry.   

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In contrast, SmartBrokers are agile and flexible, with the ability to quickly adapt to new technologies and changing customer needs. SmartBrokers take a more proactive approach towards building their business, actively seeking out the best options for their clients and negotiating rates with carriers on their behalf.

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What Makes a SmartBroker Smart?

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All SmartBrokers possess 4 key traits that set them apart from the pack. 

1. Growth Mindset
2. Advanced Technology
3. Deepest Relationships
4. Operational Excellence

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These pillars are the foundation for any freight brokerage evaluating themselves and their journey to fully embracing modern SmartBroker best practices. 

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Growth Mindset

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SmartBrokers know that every contract is not guaranteed, so they are obsessed with constant improvement and growth. They are in the constant pursuit of differentiating tools and strategies to win new contracts or build upon existing contracts. Market shifts like digital, real-time, flexible, just-in-time business models are not roadblocks but instead springboards for new opportunities. 

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Advanced Technology

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Implementing a best-in-breed, fully-integrated freight technology stack enables SmartBrokers to harness the power of complementary tools. Jobs effortlessly move through their technology ecosystem from preload tools like CRM and TMS to post-load tools like Freight Payment Systems.

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Deepest Relationships

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The freight and logistics industry is built on relationships. SmartBrokers understand this deeply and are laser focused on creating meaningful interactions with all parties. By eliminating transactional communication and leading with empathy, SmartBrokers provide stellar service to carriers and shippers alike. 

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Operational Excellence

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Operational excellence is the back-bone of SmartBrokerages, enabling them to move quicker and smarter. Intelligent automation is deployed across a SmartBroker’s operating model to create a highly efficient and low-error set of services.  

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Why Become a SmartBroker Now?

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According to IBIS the whole freight broker market has grown ~6% per year over the past 4 years and is expected to grow ~2% this year.  Individual freight brokerages are seeing larger swings in their growth rates as they compete for market share. 

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The transportation industry continues to evolve, so it is important for freight brokers to consider whether they are operating as efficiently and effectively as possible, and whether transitioning to a SmartBroker model could benefit their business. Embracing advanced technologies and prioritizing efficiency, transparency, and customer satisfaction means that freight brokers can position themselves for success in the 21st century. The evolution for all freight brokers to SmartBrokers is an important step towards a more efficient and effective industry.

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Benefits of Being a SmartBroker

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‍Increased efficiency:

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Utilizing advanced technologies and data analytics tools, SmartBrokers optimize routes and negotiate premium rates with carriers, resulting in increased efficiency and cost savings for their clients. A SmartBroker might use real-time traffic data to select the most efficient route for a shipment, a Freight Payment System to streamline and manage the payment & invoicing of carriers & shippers, or an integrated TMS to automate certain aspects of the booking and dispatch process.‍

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Improved transparency:

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‍SmartBrokers prioritize transparency in their operations, providing timely (and automated) status updates and information to their customers and carriers. When all parties have a clear understanding of the shipping process, it helps to build trust and establish long-term partnerships that are profitable for everyone.‍

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Enhanced customer satisfaction:

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‍A user-friendly platform and effective communication is table stakes today.  SmartBrokers are able to deliver a seamless and efficient shipping experience that exceeds the expectations of their clients. The increase in customer satisfaction creates loyalty, as well as helps to establish a stronger reputation in the industry.‍

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Greater adaptability:

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‍SmartBrokers are agile and flexible, with the ability to quickly adapt to new technologies and changing customer needs. The natural desire to stay ahead of the curve and respond to shifts in the market helps ensure that they are operating as efficiently and effectively as possible.‍

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Increased competitiveness:

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‍By embracing the principles of a SmartBroker, freight brokers can differentiate themselves from traditional brokers and digital marketplace brokerages, positioning themselves as leaders in the industry.This helps to attract new customers and build long-term partnerships with like-minded shippers and carriers, leading to increased competitiveness and success.‍ 

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Steps to Becoming a SmartBroker

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1. Assess your business model and technology stack.

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Identify gaps against industry SmartBroker best recommendations (below) and success stories. 

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Take stock of your existing business and operations today. Where are your strengths and weaknesses?  Are there bottlenecks in your processes? What could be made more efficient with technology?

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Assess your tech stack and each component to ensure interoperability.  Try to reduce existing manual processes and avoid adding new ones.  Remember to keep in mind efficient work distribution for every system and individual using the systems.

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Reach out to peers and advisors to ask questions and understand best practices.

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2. Create goals and source vendors

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Identify your long term vision and set achievable steps along the path towards it. Source vendors and design target state model along with a change management plan to achieve your goals of tech stack and operational improvements

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Launch vendor evaluations for tech stack improvements

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Build a change management plan for operations improvements

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3. Launch new technology  and “go-live” with processes

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With your technology and tools in place, it's time for the work to begin.   Design your change plan. Build a timeline. Phase in your changes and execute on the plan!  Easier said than done, but if you’ve gotten this far it is clear you are a lunch pail carrying, walk-the-walk, nose to the grindstone, rubber meets the road SmartBroker.  You’re our kind of SmartBroker

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4. Continue to evaluate

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Continue to evaluate opportunities for improvement and plan steps for your ongoing evolution.   The industry is changing in such amazing ways, and SmartBrokers know that there are always new ways to grow and improve their business to be a leader in the space.

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What Does a SmartBroker Tech Stack Look Like?

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Every freight broker is different, but in general a SmartBroker will have a freight tech stack that consists of a mix of the following platforms & services.

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TMS

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A Transportation Management System (TMS) is a software application that empowers brokers to plan, create, manage, and analyze freight load jobs. A TMS offers visibility into day-to-day transportation operations, trade compliance information and documentation, and helps ensure the timely delivery of freight. Some advanced Transportation Management Systems include track and trace services – enabling real-time information exchange from the SmartBroker with carriers and shippers.

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Examples of freight broker TMS systems that a SmartBroker might use: Aljex, EKA, MercuryGate, Tai TMS, Turvo, Quote Factory

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Accounting Software

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SmartBrokers use accounting software for accepting business payments, managing and paying bills, and other assorted payroll functions. Benefits include:

• Streamlined financial reporting.  SmartBrokers can generate financial reports, such as income statements, balance sheets, and cash flow statements, based on the data entered into the system. This makes it easy to understand financial performance and make informed business decisions.
• Track and manage expenses, such as fuel costs, driver pay, and other operational expenses. This can help brokers to better understand and control their costs, and make adjustments as needed to improve profitability.
• Manage taxes and tax compliance, which  is an important aspect of any business, especially for freight brokers. Accounting software can help in calculating, tracking, and paying taxes.

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Examples of freight broker account software that a SmartBroker might use: Quickbooks, Xero, Sage, Oracle

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Carrier On-Boarding & Safety Compliance

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Carrier on-boarding is the process of bringing new carriers (or transportation providers) into a company's network. This process typically includes a review of the carrier's safety compliance records, insurance coverage and other qualifications,  to ensure that the carrier meets the company's standards for safety and compliance. Safety compliance refers to the adherence to regulations and industry standards related to transportation safety, such as the Federal Motor Carrier Safety Administration (FMCSA) regulations in the United States. 

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• Compliance management software: These systems are specifically designed to help SmartBrokers manage compliance with transportation regulations from the FMCSA, or the DOT.  The software typically includes features such as automated compliance checks – which compares a carrier's compliance records against the relevant regulations, and compliance dashboards – which provides an overview of a carrier's compliance status.
• Safety management software: SmartBrokers use these systems to manage safety-related aspects of their transportation operations, such as driver training and safety audits. The software typically includes features such as online training modules, – which allow drivers to complete required training remotely, and automated safety audits – which can be used to evaluate a carrier's compliance with safety standards.

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Examples of freight broker carrier on-boarding & safety compliance systems that a SmartBroker might use: Highway, MyCarrierPortal

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Capacity Management 

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Capacity management is a data-driven software that helps SmartBrokers find and book the best carriers with the most efficient loads at the right moment. With capacity management software, Smarbrokers are able to expand capacity, scale bandwidth, and grow their business.  Capacity management helps to encourage carrier re-use and better carrier relationships, empowers your broker team to be more efficient and effective in their daily work, and higher and more profitable customer win rates. 

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Examples of freight broker capacity management systems that a SmartBroker might use: Parade, Descartes Macropoint, FreightFriend, Logistyx

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Customer Acquisition (Sales & Marketing)

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Freight brokers use a variety of customer acquisition software and information sources to help them identify and connect with potential clients.

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Lead generation software, which helps brokers identify and track potential clients and leads.

• Zoom Info
• LinkedIn Navigator
• Thomasnet.com

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Marketing automation software, which helps SmartBrokers automate repetitive tasks such as sending out email campaigns and managing social media accounts.

• Hubspot, MailChimp, ConstantContact

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Sales software, which helps SmartBrokers manage their sales pipeline and track progress towards sales goals.

• Salesforce, Hubspot, SugarCRM, Zoho

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Additionally, staying connected with key industry resources is crucial to staying informed and relevant when discussing new business opportunities. 

• Trade Shows
• TIA Membership
• FreightWaves Sonar Data (stay on top of industry trends)

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Rate Pricing & Quoting System 

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SmartBrokers can manage and automate the process of obtaining rate quotes from carriers, and then using that information to create and send quotes to their own customers. This type of software typically includes tools for managing carrier relationships, tracking market trends and pricing data, and generating quotes based on a variety of factors such as shipment size, distance, and delivery time. Some systems may also include features for tracking and managing customer relationships, including tracking customer-specific pricing and terms. SmartBrokers use Rate Pricing & Quoting Systems to streamline and increase the overall efficiency and accuracy of the pricing and quoting process, which can help to increase profitability and improve customer satisfaction.

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Examples of freight broker rate pricing & quoting systems that a SmartBroker might use: Greenscreens.ai, CollaboRATE, CargoChief

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Load Boards/DFM Marketplaces

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Whether we like it or not, all brokers must be masters of these systems.  They allow freight brokers to post available loads and search for available carrier capacity. Load board software typically includes features such as load matching, carrier rating, and messaging, which allows SmartBrokers to communicate with carriers and negotiate rates. Digital Freight Matching marketplaces lets brokers to filter loads by specific criteria, see pre-posted rates, and book these loads right away.

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Examples of freight broker Load Boards/DFM Marketplaces that a SmartBroker might use: DAT, Truckstop, 123 Load board

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Tracking Visibility

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This software provides SmartBrokers with  real-time visibility into the location of shipments, as well as other important information such as delivery status, estimated time of arrival, and any delays or issues that may arise. This information can be used to improve communication with customers and ensure that shipments are delivered on time and in good condition. Additionally, freight broker tracking visibility software can help to improve the efficiency and productivity of SmartBrokers by automating many of the tasks associated with tracking and monitoring shipments.

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Examples of freight broker tracking visibility systems that a SmartBroker might use: Samsara, Fleetio, Trucker Path

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‍Freight Payment System 

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A Freight Payments System (FPS) is a specialized tool for SmartBrokers that streamlines the process of paying carriers, credit checking customers, invoicing freight charges, and reconciling payments between shippers, carriers, and other parties involved in the transportation of goods. Freight payment systems are one of many key components to a robust SmartBroker freight tech stack.

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‍A freight payments system streamlines and automates manual tasks throughout the full life cycle of a load, including: 

• Customer credit checking
• Flexible financing options including factoring, cash, lines of credit 
• Invoice receipt and verification 
• Invoice audits 
• Carrier payments, scheduled based on term agreements and with a QuickPay option
• Detailed reporting on financial aspects of business

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Example of freight broker Freight Payment System that a SmartBroker might use: Denim

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Are you a SmartBroker?

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2024 is the year of the SmartBroker.  As our industry continues to evolve, Denim is here to support the brokers, carriers, and shippers who are moving it forward.   Get in touch with us today to discuss how a Freight payment System would benefit your specific operation. Or speak with a SmartBroker expert to get a better understanding of what the future holds for freight, logistics, and the greater supply chain. Freight brokers have been around for decades, but in recent years, the industry has seen the rise of a new type of brokerage - the SmartBroker.

We are in a trucking recession and its impacting the whole industry.

Consumer demand is lower and profits are thin. And unfortunately, the freight industry outlook for 2024 does not look ideal. 

Shippers remain in control with more market power than they did in 2022 causing carriers and brokers to negotiate contracts to maintain volume.

With the right strategies in place, you can weather the down market and come out even stronger on the other side. 

In this blog post, we'll cover 10 things that you should keep in mind during the trucking recession. From staying up-to-date on market rates to embracing technology, these tips can help you navigate the challenges of a loose market and come out on top. So if you're a freight broker looking to stay afloat, read on for some things to keep top of mind. 

1. Stay informed of market changes 

Economic conditions can have a significant impact on demand for shipping and transportation services. This can affect the rates that you are able to negotiate with carriers, as well as the availability of capacity. 

By staying informed about market conditions, you can make more informed decisions about which carriers to work with, lanes to prioritize, and how to price services. 

There are several ways to stay up-to-date and keep a pulse on the market. 

• Monitor industry news and trends: Follow news sources like FreightWaves, The Freight Coach Podcast, Transport Topics, and Truckers Forum.
• Use data and analytics tools: Software tools help you track market conditions, such as supply and demand trends, carrier rates, and shipping volumes.
• Monitor business performance: Key business metrics like average days sales outstanding and fastest or slowest paying customers can give you a snapshot of business health. With regular monitoring, you can make any necessary adjustments to your operations.  
• Talk to carriers and other industry partners: Proactively engage carriers and other partners in industry discussions to gain valuable insights and perspectives on market conditions.

2. Diversify your customer base 

Diversifying your customer base is not only good business advice, but critical in today’s market. 

Relying heavily on a single customer or a small group of customers can put your freight brokerage at risk. If that customer goes out of business or significantly reduces their shipping volume, it could have a major impact on your revenue and cash flow. 

A diverse customer base provides your freight brokerage with a more stable source of revenue and you are less reliant on any one customer or even industry. This can help to ensure the long-term viability of your business.

3. Don't be afraid to negotiate.

During economic downturns, demand for shipping and transportation services decline, which can lead to excess capacity in the market. This can put downward pressure on rates and hurt your bottom line. 

Contracts and rates put in place during different freight conditions should be re-evaluated during a freight recession. Are there new terms that could be favorable to both parties in today’s economy? By renegotiating rates with carriers, clients, and partners, you may be able to secure more favorable terms and improve margins.

However, it's important to maintain good relationships with your carriers and to be fair and reasonable in negotiations. When the freight market picks up and you need to move freight, you’ll be thankful for those strong relationships.  

4. Keep an eye on expenses

Three quarters of freight brokers use accounting software like QuickBooks, Freshbooks, or NetSuite according to our recent report. This year, you will likely be getting more familiar with those platforms. 

In this environment, it is especially important to control expenses and keep them as low as possible. Regularly checking on expenses and revenue help mitigate any surprises and help you make the best decisions in terms of expense cutting.  

This may involve negotiating higher rates with shippers,  lower rates with carriers, or streamlining operations to dedicate more employee time to revenue-generating activities. By taking a proactive approach to cost management, you can increase your chances of weathering the economic storm and emerging on the other side.

5. Look for new opportunities

A recession can also bring about new opportunities otherwise not considered.

In a downturn, some segments of the market are less affected than others. For example, rising inflation is shifting consumer spending from consumer technology, clothing, and cosmetics spending to necessities like groceries and household goods. The shift in demand could mean new business for your freight brokerage. 

Similar to change in demand, more manufacturers and companies are reshoring or nearshoring in 2023. Production is moving away from Asian countries to the Mexico/U.S. border or within the U.S and 62% of manufacturers have already begun the process, according to Deloitte's Future of Freight Research. Respondents of the survey expect agriculture, apparel, and consumer electronics to see supply lines being reconfigured the most. 

This trend will redraw the transportation map generating new lanes and opportunities for your brokerage. 

By identifying high-demand markets and new production regions, your brokerage can create new opportunities for your brokerage. 

6. Embrace technology

Not utilizing technology in today’s market is a grave mistake. 

Software and online platforms support almost all facets of a business from streamlining operations to improving customer support. 

Transportation management systems, digital freight matching, accounting software, and financial enablement platforms (like Denim) can help your freight brokerage run smoothly. But to get the most out of them, evaluate your tech stack for integration opportunities. When systems work cohesively, your freight brokerage can reduce hours of manual entry. 

For example, Denim integrates with TMS systems like TAI, EZ Loader, and Ascend enabling freight brokers to book loads and submit for invoicing and collections with a single click.

Developing the right tech stack for your freight brokerage can not only support your business but optimize it for success this year. 

7. Stay in touch with your clients 

Good communication is key during a loose market. Providing a white glove service can be the difference between winning a new lane or being cut. 

Regular communication with clients helps build trust and establish long-term partnerships. This includes sending progress updates on a shipments pickup, transit status, delays, and delivery. An open line of communication makes asking for additional business or referrals easier on both sides. 

A client relationship does not end when a shipment is delivered. Your freight brokerage should promptly invoice clients with a professional and clear document detailing the shipment. This can be handled by automation and should not be done sloppily. Post-shipment is also a great opportunity to ask clients for feedback or leave a review for your business.  

By staying in touch with clients, you build a rapport and have the opportunity to identify opportunities to improve your service.

8. Be proactive

Competition is going to be high this year. And the truth is, not everyone will make it. Those that put in the effort will not only survive the downturn and emerge resilient for years to come. 

By being proactive, you can identify new opportunities to grow your business, such as by expanding into new segments or markets, offering new types of services, or embracing new technologies. Proactiveness will likely put your brokerage ahead of the competition and improve responsiveness to changes in the market. 

Ultimately, being proactive is an important part of building a successful and sustainable business in the long term.

9. Get your mindset right

It's easy to get discouraged during a loose market, but try to stay positive and focus on the long-term. Remember that economic downturns are usually temporary and the market will eventually bounce back.

In fact, positivity can be a business advantage. 

A positive attitude can also help you build strong relationships with clients, carriers, and other industry partners. By remaining positive and optimistic, you can inspire confidence and build trust, which can be critical to your success.

Positivity breeds creativity. By approaching challenges with a can-do attitude, you can be more open to new ideas and more likely to find innovative ways to overcome obstacles.

10. Seek support

Good news: this isn’t the first-ever freight recession. 

Many freight brokerages survived the 2019 recession, and are willing to help new and growing brokers. So don’t be afraid to reach out to industry groups or seek the advice of a mentor or colleague. 

Industry organizations can provide valuable resources and support, such as industry news and analysis, access to networking events, and professional development opportunities.

The freight and logistics community is eager to help one another. Remember, you are not alone and  have a range of options available to you to help navigate the challenges of an economic downturn.

Whether you are a 100-person freight brokerage or a new broker, we are all feeling the effects of the freight recession and this year will not be easy. However, with challenges come new opportunities to diversify and try new strategies. Through this loose market, your freight brokerage will emerge stronger and more resilient than in 2023. Remember to seek new opportunities, keep expenses low, and maintain a positive outlook. 

Welcome to 2023! As we begin the new year, it's important for freight brokerages to stay ahead of the latest industry trends. Here are 8 predictions that freight brokerages should keep an eye on in the coming year. From the increasing adoption of technology to the evolving regulatory landscape, these trends will shape the way freight brokerages operate and compete in the market. Freight brokers that are looking to improve, become smarter, and embrace these trends will not only survive but thrive in the competitive and constantly evolving market of 2023.

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Prediction: Look towards diversifications, consolidations, and advancement in middle mile visibility & technology.

In recent years, shippers all over have been turning to regional final mile carriers to increase efficiencies in their supply chain. Now, many of those same brands will look to do the same with their middle mile. Diversifications, consolidations, and advancement in middle mile visibility & technology will play a big role in 2023. 

This could involve shippers partnering with a wider range of regional carriers to increase efficiency and flexibility in their supply chain, or larger carriers expanding their middle mile operations to serve a greater number of shippers. Consolidation, on the other hand, could involve smaller carriers joining forces with larger ones to gain access to new markets or expand their capabilities.  Additionally, as stakeholders demand greater transparency and real-time tracking throughout the supply chain, companies will need to invest in technology solutions that can provide this level of visibility. 

‍Anthony Curreri

Founder & Chief Executive Officer at Roadly Logistics

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Prediction: Connected platforms and ecosystems in supply chain logistics will begin to gain mind-share in 2023 - affecting everything from network design and management, to payments.

With the announcements of AWS Supply Chain, and Microsoft Supply Chain Platform, and similar initiatives underway at Google Cloud Platform and Oracle, more people and organizations in supply chain logistics will begin to see the potential for connected platforms in logistics to create immense value for beneficial cargo owners. It will take time for such platforms to reach full maturity, but in a world that is becoming more volatile, uncertain, complex, and ambiguous, beneficial cargo owners need to participate more directly in managing their freight and logistics supply chains from end-to-end - that will serve as an accelerant for the development of such platforms AND it will be a boon for logistics technology startups with mature products that solve specific problems that the big tech behemoths can't solve.

‍Brian Laung Aoaeh, CFA

Founder & Managing General Partner, REFASHIOND Ventures

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Prediction: The truckload market will remain stressed through the first half of 2023, but it's still a great time to be a broker. 

The benefit of brokerage is that it's always an optimal market for growth. When supply is tight, brokers have the ability to drive volume to good, reliable carrier partners. In a market flush with excess capacity, brokers fill the need of pairing high volume shippers with the right carriers. The pricing strategies change, but the value remains balanced between strong carrier and customer relationships. 

Additionally, now is the perfect time to diversify your mode mix. We're seeing LTL carrier rates beginning to fall and the focus shifting to volume. Brokers offering both TL and LTL options can minimize revenue impacts during a down market. 

‍Brandon Dean

Vice President Sales at Quote Factory

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Prediction: Higher expectations for visibility.

From the driver to the customer, supply chain stakeholders have higher than ever standards for what they expect in terms of visibility. In 2023 this standard will only increase. The market wants insight into supply chain movements and technology partners will have to rise to the occasion. This includes real-time tracking of shipments, updates on delivery status, and access to information about the location and condition of goods. 

To meet these higher expectations, freight and logistics companies will need to leverage technology to provide stakeholders with the visibility they demand. This may involve implementing tracking systems, investing in advanced software solutions, or partnering with technology providers who can offer the necessary visibility tools.

‍Jayson Peterson

Vice President of Strategic Alliances, Turvo 

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Prediction: Freight brokerages will focus on operations to mitigate supply chain volatility.

To better manage supply chain volatility, companies must prioritize lead time management, cycle time reduction, and visibility and collaboration in 2023. Lead time — the amount of time a broker gets before the ship date of a load — is critical. The more lead time a broker secures on a shipment, the better the rate and service for the customer. 

Having a transparent, efficient process for load cycles and over-communicating will allow companies to handle volatility more effectively. For example, a broker should explain a rate change for a same-day shipment in a market with limited capacity. GPS tracking also encourages visibility and more efficient collaboration, eliminating the back-and-forth between shippers and broker agents trying to determine a truck’s location for pick up or delivery.

‍Ashley McMillan 

Senior Sales Manager at Denim 

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Prediction: Growing interest in cybersecurity. 

With industries focusing on digital transformation initiatives — particularly in the logistics sector — companies are increasingly susceptible to security and data risks. These aren’t sophisticated attacks, either. Bad actors are casting wider nets to capture sensitive information from many freight companies because they know they don’t have continuous security monitoring or employee cybersecurity training. In 2023, cybersecurity will come to the forefront of the freight-tech conversation. We will see large and even small freight brokers only partner with technology companies with cybersecurity protocols in place.

‍Sean Smith 

Head of Product at Denim

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Prediction: The rise of SmartBrokers empowered by broker tech stacks including financial enablement platforms, will put pressure on the entire industry to evolve.

SmartBrokers often have a strong online presence, with user-friendly and intuitive websites or platforms that allow shippers to easily book and track shipments. They may also make use of data analytics tools to optimize routes and negotiate the best rates with carriers, and might even utilize artificial intelligence to automate certain aspects of the booking and dispatch process. In addition to these technological capabilities, SmartBrokers prioritize effective communication with both their clients and carriers, ensuring that all parties have timely and accurate information throughout the shipping process.

Overall, the goal of a SmartBroker is to provide a seamless and efficient freight brokerage experience that exceeds the expectations of both their clients and carriers.

‍Fritz Lauer

Head of Marketing at Denim

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Prediction: Mergers and acquisition activity will increase in the freight space. 

“I expect we’ll see a significant influx of M&A activity next year, largely due to valuations being significantly down overall. It's an ideal time to buy companies at a lower price. The vast majority of the market is bleeding through its last round and will have a tough time raising its next one. In 6-12 months, we’ll see many flat and down rounds, forcing conditions to worsen before improving. Companies with sufficient cash flow or profitability will be well positioned to buy companies at a great price and supercharge their growth.

‍Bharath Krishnamoorthy

CEO at Denim 

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Freight and Logistics in 2023

2023 is shaping up to be a year of significant change and innovation in the freight and logistics industry. From the increasing adoption of technology to the evolving regulatory landscape, it's clear that the status quo is no longer sufficient for companies looking to succeed in this competitive and dynamic market.

The key takeaway for freight and logistics companies in 2023 is the importance of shifting conventional mindsets and developing solid supply chain and logistics strategies that align with the current landscape. This may involve embracing new technologies, partnering with innovative service providers, and continuously adapting to the changing needs and expectations of stakeholders.

Staying up-to-date on the latest trends and being willing to take calculated risks and make necessary changes is paramount for freight and logistics companies to position themselves for success in the year ahead. It is crucial for companies to stay agile and proactive in order to thrive in this exciting and rapidly-changing market.

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Freight brokerages were quick to adopt technology during record-setting COVID-19 demand. 

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But, the economy is in a very different place as we look towards 2023. Freight brokerages are facing plummeting spot rates, high inflation, and low consumer demand for goods. 

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Investing in freight broker technology, while previously an optional “nice-to-have”, is  now paramount for success in 2023. Savvy freight brokerages are prioritizing technology to survive and even thrive in a soft market. 

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FreighTech is playing a crucial role in maximizing efficiency, enhancing customer service, and bolstering competitiveness for savvy brokers already like Direct Expedite and Scale logistics, and will continue to for years to come.

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Improve Efficiency and Productivity with Automation 

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Anyone working in the logistics industry knows time is money. 

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Many brokerages were positioning their strategy for growth in 2023, but are now facing a reduction in personnel budget. In the absence of new employees brokers can rely on technology to boost productivity and efficiency within a team. 

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In fact, more than half (52%) of respondents in Denim’s Freight Brokerage Pulse Report indicated they are prioritizing increasing overall efficiency in 2023. 

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Automation and efficiency go hand-in-hand. Mundane tasks like creating and submitting invoices are ripe for automation. Freight brokerages are prioritizing automation technology to free up employee’s time for revenue-generating tasks while also boosting morale. Who really wants to be a data-entry machine? 

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Solutions like Denim streamline freight brokerages back-office operations through automation. With a single click from a broker’s TMS, Denim will invoice, collect, and pay contractors. Ultimately, the automation benefits shippers with consistent and timely billing, carriers with fast payments, and your staff with reduced data entry.

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Why does it matter in 2023? 

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Lower consumer demand equals less freight. Winning freight will require more prospecting hours, a winning sales strategy, and a large focus on building lasting relationships. By automating mundane tasks, brokerages can shift their focus to provide the best customer service while freeing up staff for more business-critical needs. 

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Enhance Customer Service with Visibility Software

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Customer service is what differentiates traditional freight brokerages from their digital counterparts. This is even more important in a shippers market. Customer service for brokerages means transparent communication with both shippers and contractors. 

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Knowing the status of shipments in real-time means everything for a brokerage. Freight visibility keeps customers informed while reducing time-consuming communications like check calls. 

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MacroPoint and Project44 are excellent examples of visibility platforms. Both platforms equip freight brokers with real-time updates on shipments and route information.  

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Brokers not only need to provide excellent customer service for their shippers, but also their preferred carriers. Shippers work with brokers with the largest and most reliable network of carriers.  

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Carriers are facing high diesel prices and maintenance inflation costs. Cash flow is tight right now. Freight brokers can keep carriers loyal and happy through transparent and fast payments. 

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Financial enablement platforms like Denim offer QuickPay at no cost for the brokerage. Freight brokers can choose to pay next-day at no cost or charge a quickpay fee to their contractors. 

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Additionally, Denim provides contractor onboarding and dashboard. Denim's onboarding collects payment and billing information from carriers in 3 simple steps. This eliminates the need for freight brokerages to manage or store sensitive information. After set-up, carriers can track payments and find proof of ACH on their own dashboard. 

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By providing these services, freight brokers can build trust, reduce carrier payment check calls, and provide a professional service to their carriers.  

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Why does it matter in 2023? 

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In 2022, the industry shifted from the carrier to a shipper market. Lower demand and a surplus of carriers means shippers have the opportunity to be more selective with their business. Providing a superior customer experience helps freight brokerages stand apart from the competition. 

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Staying Agile with Business Intelligence Tools

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There’s no doubt 2023 will be a competitive year for freight brokers. Many expect the spot market will bottom out in the first or even in the second quarter, but only time can tell. 

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Instead of a crystal ball, freight brokerages rely on data to identify the most lucrative shipping mode, loads, and rates. Real-time data arms freight brokerages with the information needed to  better respond to market fluctuations.   

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Through transportation management software freight brokerages can manage their operations more efficiently.  The platform manages a brokerage's shipment tracking, route planning, and payments when integrated with a factor.  Ascend, TAI, and EZ Loader are few examples of integrated TMS.

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During times of uncertainty, freight brokerages need to keep an eye on important business metrics. Metrics like accounts payables, receivables, and profits can show the health of a business.

Freight brokers can integrate their accounting software with a payments platform to track financials. No calculator needed 

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Denim's Quickbook integration provides freight brokers with a Business Analytics Dashboard. The dashboard compiles data on jobs over time, average days sales outstanding (DSO), fastest-and-slowest-pay customers, most profitable customers, and most used contractors. These insights help freight brokerages optimize operations and make better business decisions.

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Why does this matter in 2023? 

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Business intelligence tools help freight brokerage stay resilient in the face of uncertainty. Tracking trends and business health equip freight brokers with information to respond quicker to market changes and make data-driven decisions.  

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Are You Ready for the Growth of Freight Broker Technology?

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Many exciting developments have come out of the supply chain's digital adoption trend, but this is just the beginning. Experts anticipate further developments, such as blockchain-based shipment tracking. Leading freight brokers are already investing in tech strategies to stay ahead of the curve. 

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Not sure where to start with your technology shift? Begin by pinpointing key opportunities to scale, reduce costs or improve profitability for your brokerage. The chances are that an enterprise software suite exists to help you achieve your goals. 

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If you're interested in learning more about how Denim can streamline your operations, we’d love to talk. Schedule a demo today!