Factoring companies are a common tool used by trucking companies to manage their cash flow and invoicing. Most of our owner-operators on the EXO Freight platform factor with third-party factoring companies. However, we've found that these companies often have high fees, hidden fees, and poor customer support. At EXO Freight, we offer a low-fee, no hidden fee, and no long-term contract factoring product, and we help carriers switch from their current firm to our factoring company, EXO Finance.
In this blog post, we'll explain the process we use to help you switch to EXO Finance.
Step 1: Review the Contract Terms
First, we'll review your current factoring agreement. Our team will help you identify the path to exit the agreement and identify any fees or time restrictions. These terms will vary across all contracts, but you can assume there's a specific time window for termination. Most commonly, we see that trucking companies can only terminate a factoring contract 60 days prior to the renewal date, but not before 90 days. It's critical to identify this window, as trying to terminate a factoring agreement outside of it will result in a failure to terminate.
Step 2: Communicate with the Factor
Once we've identified the termination criteria, the next step is to send an email to your current factoring representative, who will most likely direct you to a transition team. We'll help you craft this email so you have all the necessary information.
The current factoring company will respond with the specific items that need to be accomplished, which generally look like this:
1. Buyout Calculation report
2. Buyout Contract
3. Name and Remit/Banking information of the incoming factoring company
Step 3: Pay Off Any Outstanding Balances
Once you have obtained a buyout calculation report and the buyout contract, you'll need to pay it in full at the time of termination. The good news is that EXO Finance can execute and handle paying off the buyout amount for you.
Some factoring companies may also ask you to pay an early termination fee. This amount can range anywhere from $500 to $20,000+. We can help pay this amount at the time of termination, but any termination fees we do pay are subject to a repayment schedule by the carrier as you begin factoring with EXO Finance.
Step 4: Transition to a New Financing Solution
Once the factoring agreement has been terminated, you'll need to find a new financing solution to meet your cash flow needs. This may involve working with a different factor or exploring other options like lines of credit or loans. Make sure to do your research and choose a financing solution that fits your business's needs and goals.
Once the contract has been terminated and the buyout has been completed, you can begin factoring with EXO Finance immediately.
