If you are hauling a load for a broker or 3pl, you may come to find that they offer quick pay as a payment option. If you plan on factoring the freight bill, you might be wondering which one you should go with, Quick Pay vs. Factoring? We are going to go over them here and try to help you decide.
What is Broker Quick Pay?
Almost all brokers offer it as an option nowadays. The concept of quick pay is really just like factoring. But instead of going to a third party for your funding, you are sort of factoring directly with your customer, though there is no additional transaction that takes place as in the case of factoring.
The way it works is simple. After you deliver a load for a broker, you’ll invoice them for your services. What happens next can differ.
If you are going with quick pay, the broker will pay the invoice within the agreed upon time frame. This can be 24 hours, 72 hours, or 7 days. Whatever you agree on.
If you are factoring, you invoice the broker as normal, but then you go to your factoring company and start the process of selling the receivable to them.
What Are the Advantages of Quick Pay?
The obvious benefit to going with this option is that it eliminates a third party; the factoring company. By eliminating a third party, you’re always going to become more efficient. Even with the best factoring companies out there, issues do arise.
The paperwork could get lost causing a delay, or maybe your factor had a bad deal with your broker in the past. You might not even be able to factor the invoice.
You can also save save valuable time by dealing with just the broker for all steps of the process. If you are an owner operator that only makes money when your behind the wheel, this is a huge benefit.
What Are the Disadvantages?
It isn’t always the best choice to go with. A major disadvantage of quick pay programs is that not all brokers or logistics companies offer it. While most do nowadays, it isn’t always a guarantee. Especially if you are hauling for a new broker.
Another disadvantage may be that the broker’s quick pay fees are very high. You may be able to secure a cheaper rate by using your factoring service instead.
And if you have a good relationship with your broker, and you trust that they will pay their invoices without issue, you might be able to further reduce your factoring costs by utilizing a recourse factoring service. Read more about recourse factoring here.
What Else is There to Consider?
Another consideration to make is if you are interested in the other perks and benefits that freight factoring companies usually offer. These include things such as fuel cards, load boards, and truck maintenance/tire discounts.
The only perk that is similar between the two options is a fuel card or fuel advance. A broker may offer you a fuel advance, though there is usually an additional cost or transaction fee for this service.
The bottom line is that when trying to decide which is better for you, quick pay vs factoring, there are a few different factors to consider.