Factoring is meant to get funds into your business— immediately. It’s a tool aimed at taking the waiting out of client payments. While factoring is a common and critical part of the industry, not all factoring terms may be as commonly known. Here are definitions of important factoring freight words and terminology:
Common freight factoring terms
Factoring: A process in which a factoring company purchases a client’s invoices and advances a percentage of that invoice quickly to the client. The factoring company then gets paid by the client’s debtor.
Debtor: The company, often a freight broker, contracts with the client for transportation services.
Consignee: The recipient of goods shipped.
Bill of Lading: A receipt listing goods shipped that are signed by the debtor and/or the client and always by the consignee.
Rate Confirmation: Document sent by debtor/broker stating the rate agreed upon by the client and debtor/broker. Generally, it will provide terms of shipment and payment.
Recourse Factoring: The client assumes credit risk on invoices that aren’t collected within a certain number of days.
Non-Recourse Factoring: Factor assumes credit risk on invoices that aren’t collected within a certain number of days. This is generally restricted to highly credit-worthy debtors. It’s only applicable for debtors’ ability to pay, not their willingness to pay.
Discount: A Fee charged on the invoice for advance and servicing.
Reserve account: An account where closed invoice rebate funds are held. Funds from this account would be released to the client on the scheduled release day.
Reserve Release: The scheduled disbursement of funds released from the reserve account to a client.
Escrow Account: The portion of the unpaid invoice not funded.
Unapplied Cash: The funds received from debtors without sufficient remittance information to allow its application against a specific invoice.
Notification of Assignment (NOA): A legal document notifying a debtor that factor’s client has “assigned” its receivables to factor. The letter instructs the debtor to remit all future payments to factor.
Recourse Period: The time that a factoring company allows for the client to pay an open invoice that the factor has funded (typically 60 or 90 days). This period is also known as the account due date.
Recoursed Invoice/Chargeback: If a purchased invoice is unpaid after the recourse period, it is required that the invoice be sold back to the client. The unpaid invoice balance will be deducted from the client’s reserve account or future submitted invoices.
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The England Carrier Services (ECS) division offers various services for carriers ranging from maintenance to support. As ECS members, carriers have access to nationwide discounts on fuel and tires from dedicated team members committed to finding the best price. ECS also provides factoring services with benefits such as same-day funding to a bank account or fuel card. These options allow carriers the freedom to focus on growing their business while saving time and money.