Freight Factoring Terms

Freight Factoring Terms

Phoenix Capital Group

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Various freight factoring terms used in the trucking industry can be foreign language to the one new to the transportation industry. Phoenix Capital Group has provided various freight factoring terms and definitions to help provide clarity for individuals and businesses looking to learn more about the freight factoring industry.

Account: All “accounts” as defined in the Uniform Commercial Code and all goods represented therefrom, including the right to stoppage in transit, replevin and reclamation.

Account executive: Or account manager, is a dedicated professional who will handle all aspects of client’s relationship with the factoring company. Meet a few PCG account managers here, and other PCG representatives.

Accounts receivable: Money that is owed to you by your customers, usually by issuing an invoice that is due to be paid within a certain period of time. Accounts receivable appears in the balance sheet as an asset since it’s considered to be near cash (i.e. due in 90 days or less).

Accounts receivable factoring: Another term for factoring.

Advance: This is the amount of money that the factoring company advances to your company when they buy the invoice. The advance is often a percentage of the gross value of the invoice and is wired shortly after the invoice is purchased.

Advance rate: The percentage of the invoice that will be advanced.  On average, Phoenix Capital Group gives advances between 75% and 100% of the gross value of the invoice.

Audit: A review carried out by to ensure that the conditions of the factoring agreement are being met.

Cancellation: The Agreement will be for a period of thirty (30) days and will automatically renew in thirty (30) day increments. The Agreement may be cancelled by Seller, at the end of the initial period or any subsequent renewal period, by providing a third (30) day advance written notice of intent to terminate, provided that all Obligations have been fulfilled.

Chargeback: An amount of money that is owed to the factor and is deducted from the client’s reserve or availability of the line due to an agreed upon non-payment by debtor clause in the factor’s contract.

Client: A company that has signed a contract with a factor for the purpose of receiving cash advances against their accounts receivable.

Closed: A Purchased Account is closed upon the first to occur of (a) receipt full payment by Purchaser Account Debtor, or (b) the unpaid face amount of the Purchased Account has charged to the Reserve Account pursuant to this Agreement.

Concentration: When all or most of a client’s accounts receivable are with a single customer, this increases risk for both client and factor.

Credit: Confidence in a customer’s ability to pay and intention to pay, by virtue of delivering goods or services in advance of payment.

Credit limit: The maximum amount a factor is willing to let its client submit for factoring for a customer.

Current account: The total amount of funds paid to you including any charges at any given time.

Customer: A company that owes a client for product or services rendered.

Dilution: The amount of risk associated with collection of the accounts receivable. It can include returns, charge backs, trade allowances, concentrations, slow payments, bad debt and other risks.

Dispute: Any dispute or claim, bona fide or not, as to the price, terms, quantity, quality or other defense to payment asserted by an Account Debtor.

Due diligence: The process the account executive uses to validate invoices submitted for factoring.

Eligible of Default: an Account eligible for purchase as determined by Purchaser in its sole discretion.

Equipment Financing: Independent truck drivers, especially those who are just starting out with their own authority, could always use a little help purchasing new equipment. Whether a truck driver is new to the transportation industry and needs the cash, or if a truck driver has the money but wants to keep it in the bank for emergencies; PCG is help to help. PCG offers equipment financing with low down payments, flexible payment schedules, and quick closing at dealerships nationwide. The faster we can get cash to our independent truck drivers, the quicker they can get back on the road.

Factor: Someone who purchases accounts receivable.

Factoring: The act of selling accounts receivable.

Factor’s advance: The initial amount of money a factor is willing to provide against accounts receivable.

Factor’s fee: The amount the factor charges for the money advanced for factored invoices.

Factor’s reserve: The amount held back from the funding to offset dilution and other risk.

Factor’s services: Pre-screening and ongoing monitoring of customers’ creditworthiness; professional collection of past due invoices.

Freight bill factoring: When factoring freight with Phoenix Capital Group, trucking companies receive payment immediately for the load they have delivered. Phoenix Capital Group purchases invoices and then funds the carriers for the receivables purchased. Many independent drivers and trucking companies rely on factoring services because they cannot afford their invoices to go unpaid for 30, 60 or 90 days, no matter the current economic times.

Fuel Card Program: Drivers save thousands of dollars a year with PCG’s fuel card program. PCG gives you the ability to use your fuel card almost anywhere. With our fuel card program, you receive universal acceptance at all major truck stops, along with many independent truck stops. In addition to the fuel savings, PCG’s fuel card program give truck drivers discounts on hotel rooms.

Invoice: An itemization of goods purchased or services provided, sent to the customer by the client, and including the amount due and terms.

Maximum account limit: The maximum amount a client may have open with the factor. This amount is part of the security agreement and may be altered by an amendment at the factor’s discretion.

Non-recourse freight factoring: Non-recourse freight bill factoring means that the factor (PCG) assumes the risk of non-payment by your clients that you hauled a load for. With non-recourse factoring, independent truck drivers are safe from the cost of bad debt. With non-recourse factoring services, the discount rate will be higher than recourse factoring services since it is a higher risk for the factor. Even with higher discount rates, many truckers see non-recourse as a promising agreement because the cost of an unpaid invoice is a much greater loss.

Notice of assignment: Notice sent to the customer by the factor, notifying the customer that payments are to be made to the factor.

Obligations: all obligations, liabilities, and indebtedness of every nature of Seller to Purchaser under this Agreement or any other agreement between Seller and Purchaser, whether arising before, during or after the commencement of any bankruptcy or other insolvency proceeding in which the Seller is a debtor.

Online load board: PCG is determined to help independent truck drivers find high paying freight quickly and with no cost. The load board extension to the PCG website is the the ultimate truck load board search for independent truckers and fleets. There are ample amounts of available loads posted by truck load carriers, freight brokers and direct shippers daily. PCG’s load board is constantly being updated to help clients find the most recent loads available. Whether you’re a new trucker or an experienced trucker, PCG’s load board will help you find loads quickly and effectively.

Proof of shipment/delivery: Confirmation that goods have been or delivered to the account debtor.

Purchase order: A request submitted by an account debtor to the client for goods or services.

Recourse freight factoring: Recourse freight factoring is an agreement between you and your factor (PCG) that your company may have to buy back receivables the factor cannot collect payment on. This type of factoring typically means trucking companies receive lower factoring fees. It also means that you, the client, must cover the cost of any invoices your customers does not pay.  Traditionally, the amount of invoices a factor has to recourse to a trucking company is very minimal.

Referral Program: PCG’s exceptional referral program is offered to individuals who refer any business to PCG, whether the referral is a PCG client or not. Our referrals are simply from individuals who decide to spread the words about PCG’s freight factoring services, equipment financing services, and/or fuel 13card program based on another’s (positive) opinion.

Reserve Account: a bookkeeping account on the books of Purchaser representing an unpaid portion of the purchase price for the Purchased Accounts, maintained by Purchaser to ensure Seller’s performance with this Agreement.

Reserve release: The amount of money released from the factor’s reserve once payment has been received and credited.

Terms: A negotiated amount of time allowed for payment of an Invoice.

  • Net 10: 10 days from invoice to pay for goods.
  • Net 30: 30 days from invoice to pay for goods.
  • Net 10/ROG (Receipt of Goods): Payment due 10 days from receipt of goods.
  • Net 10/2%: Customer may take a 2% discount if paid within 10 days.

With recourse
: The factor grants a limited amount of time for the customer to pay.

phoenix capital group, llc