Last year was a treacherous time to be in the logistics industry. While experts are more optimistic about 2024, flipping the calendar over to January did not offer instantaneous relief.
Brokers and carriers are still feeling the sting of the ongoing freight recession, and factoring companies can be critical partners during this time. This is especially true as freight brokers — ranging from small companies to household names — continue to enter and exit the market at breakneck speeds.
When a broker unexpectedly closes up shop, that company’s carrier partners run the risk of not getting paid. Losing out on a significant chunk of income is not something that most carriers are equipped to weather in the current economic climate. In the most dire situations, this type of loss can actually force a carrier to close its doors as well.
That is where factoring companies come into play. True Non-Recourse factoring is the only reliable way carriers can shield themselves from the financial impacts of broker shutdowns. This type of factoring completely shifts any liabilities related to uncollected and uncollectible payments from the carrier to the factoring company.
This means that once the carrier delivers the load, submits paperwork and receives payment, they no longer have to worry about that invoice again – even if the broker goes out of business. There are no chargebacks, ever.
“True Non-Recourse factoring is the only solution available to carriers and owner operators of any size that fully and completely protects your business from a loss in free cash flow when a broker or customer files for bankruptcy and slow downs in broker pay,” according to a recent OTR blog post.
OTR Solutions offers both True Non-Recourse and standard recourse factoring programs. It is important to note, however, that OTR’s recourse option is largely synonymous with the programs that most other factoring companies market as non-recourse.
It is not uncommon for a factoring company to call its offerings “non-recourse,” when in reality, carriers still end up bearing the brunt of another company’s financial missteps. This is why it is important for carriers to look past buzzwords and explore the specifics of each program before deciding on a factoring partner.
Looking out for carriers is at the heart of everything OTR does.
With over 10 years of experience in the industry, OTR Solutions has picked up on tell-tale signs that a broker may be at risk financially. When OTR senses that a broker may be in danger, the company puts that broker on a “no buy” for its true non-recourse customers, shielding them from as much risk as possible while affording them the opportunity to more naturally shift their capacity to other lanes and avoiding an abrupt disruption in cashflow.
When this happens, OTR’s recourse customers are still able to factor invoices from that broker, as they knowingly assume the risk under a recourse program. These customers still benefit from the company’s wealth of knowledge when making these types of decisions, though.
“Because of the protections in place under our True Non-Recourse program — and the watchful eye it requires — even our recourse clients are given a heads up and are notified of potential issues that may impact their business,” according to a representative from OTR.
In short, no matter which program type a carrier chooses, factoring with OTR provides an unparalleled level of transparency and protection. More than just cashflow, OTR is a business partner with a full team of experts who are trained to give carriers all the information they need to make the best possible decisions.
This is essential in today’s market, when the chances that a carrier will see one or more of its brokerage partners shut down remains high.
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