‘Low rates!’ ‘Risk-free!’ ‘Fast cash!’ ‘No upfront fees!’ These are just a few of the phrases you see when you search for invoice factoring rates. You might find a number of deals from factoring companies advertising low rates and quick cash flow. This sounds good on the surface, but there are often many details that aren’t disclosed upfront.

All too often, factoring rates and deals that sound great at first end up being too good to be true.  Many recourse factoring contracts come with fine print attached, putting you and your business on the hook for future risks. For example, when you sign a contract for recourse factoring, you assume the credit risk of the broker or shipper you are hauling for. This means you’re essentially gambling on the reliability of the factoring company, with no guarantees they’ll collect on your invoice. But because you’re locked into a contract on their terms, those unpaid invoices will again become your responsibility after the terms of the agreement expire (usually 60 to 90 days).

Low Factoring Company Rates: Understanding the Nitty Gritty Details

A lot of factoring companies advertise super-low rates to get more customers, but they don’t always clarify the details. For example, did you know there are many ways for those ‘lower rates’ to change? Typically, the lower rate is introductory and only good for a certain number of days. After that, the rate will rise incrementally, sometimes even daily – yikes! Also, after an additional number of days, you must use your hard-earned cash and buy the delinquent invoice back from the factoring company. Talk about an unpleasant surprise!

And there’s more. With some of these ‘low rate’ deals, you’re also locked into a contract of one or two years. These contracts are very difficult and sometimes very expensive to get out of. Unfortunately, such long-term agreements are hard to detect up front, because the contracts are so extensive and filled with confusing terms. As a result, you may not realize the full extent of what you’re accountable for.

Knowing the Bottom Line

When it comes to maintaining cash flow, factoring invoices at a good rate is a useful financial tool. However, since your main concern is the long-term health of your business, you want to avoid taking on unnecessary risk. To avoid damaging your business over time, consider non-recourse factoring with clear and reasonable rates, where you don’t become responsible for invoices that go unpaid. While non-recourse rates may be a bit higher upfront, you’ll avoid a lot of headaches, hidden fees and long-standing contracts – and that saves you money and hassle over the long haul.

As of December 18, 2017, trucking companies will be required to use E-logs. With an average cost of $495 per year, that’s an expense that will now need to be part of your budget. All commercial motor vehicle drivers will need to comply with the Federal Motor Carrier Safety Administration’s ELD Mandate.

What is the ELD Mandate?

This rule was established to improve commercial vehicle safety and reduce overall paperwork for both motor carriers and drivers. Annually, the FMCSA estimates 1,844 crashes could be avoided, with 26 lives saved after the new E-log devices are in place. E-logs are also designed to prevent driver harassment by employers, deterring carriers from attempting to force ill or fatigued drivers out on the road.

ELD Requirements

• ELDs must be used by commercial drivers who are required to prepare hours-of-service (HOS) records of duty status (RODS).
• ELDs must be certified and registered with FMCSA.
• Drivers and carriers must keep specific supporting documents.
• Drivers are not to be harassed over ELD data – this data may actually back up claims of drivers who believe they have been harassed.

Limited Exceptions

• If you’re a driver who operates under the short-haul exceptions, you may continue using timecards. Because you aren’t required to keep RODS, you won’t need to use ELDs.
• If you’re a driver who uses paper RODS for not more than 8 days out of every 30-day period, you won’t need an ELD.
• If you’re a driver who conducts drive-away-tow-away operations, an ELD isn’t required.
• If you drive vehicles manufactured before 2000, an ELD isn’t needed (it requires synchronization with the electronic control module, which isn’t possible in older trucks).

Your ELD is Required to:

Automatically record date, time, location information, engine hours, vehicle miles and identification information for you, the carrier, and your vehicle.

• Record all information at least hourly when the vehicle is in motion.
• Record all of the elements changes in duty status
• Record changes to a special driving category, such as a yard move.

Drawbacks to the ELD Requirement

The major drawback to the ELD requirement is the anticipated loss of productivity for drivers. Being micromanaged by the FMCSA will most likely result in less miles being driven by each driver, which will drive up costs and slow down delivery times. Additionally, small trucking companies with fewer resources will get hit hard with the upfront cost of the ELD as well as the monthly subscription cost that comes along with it. Furthermore, as the regulations are currently written, drivers have very little flexibility in bending the hours of service rules without being penalized. Many trucking companies are claiming that this rule may actually cause more accidents, since drivers will be forced to stay off the road even if they are not tired. This may result in truckers driving at other times when they actually may be fatigued.

The new regulations can be confusing, but if you stay informed, you can stay on top of the requirements and avoid complications. For more information, visit the FMCSA’s FAQ at: https://www.fmcsa.dot.gov/hours-service/elds/faqs