How to switch factoring companies

As a trucking business owner, you understand the importance of efficient cash flow management. Timely payments are crucial to keeping your operations running smoothly, enabling you to pay for fuel, maintenance, and other essential expenses. 

However, all too often, factoring services talk you into signing long-term contracts that can be hard to get out of when you start experiencing delays in payment, poor customer service, or excessive fees.

If you find yourself in this situation, it’s time to switch your factoring company. With thousands of carriers having already made the transition to Bobtail, we know the process for changing factoring services like the back of our hands.

In this blog, we will explore the reasons why switching factoring companies can be a beneficial move for your trucking business. We’ll also guide you through the process of freeing yourself from long-term, restrictive contracts to seamlessly transition your freight factoring service to Bobtail. 

With our flexible 30-day agreement and no hidden fees, we put the control back into carriers’ hands. If you’re ready to talk to someone about switching your service to Bobtail, contact us now to get all your questions answered and get started!

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Reasons for Switching Factoring Companies:

Here are the most common reasons carriers switch their factoring service:

Delays in Payments

When your current factoring company consistently falls short of delivering timely payments, it can hinder your ability to manage day-to-day expenses and disrupt your cash flow cycle. 

Some factoring companies may promise same-day payments but then aren’t able to deliver. Combine this with signing a long-term contract, and you’re stuck with a service that wasn’t even what you signed up for in the first place.

At Bobtail, we offer same or next-day payments. Send in all the required information for the load by 11 AM EST, Monday -Friday, and we’ll send your money by 6 PM EST the same day. If you submit the information after 11 AM EST, you’ll get payment the next business day in the morning.

The fact that Bobtail doesn’t require a long-term contract means we have to keep this promise because you can leave with a 30-day notice any time.

Poor Customer Service

Dealing with unresponsive or unhelpful customer service representatives can be frustrating and time-consuming. We’ve heard plenty of stories from carriers saying their factoring company won’t even answer the phone!

At Bobtail, we prioritize exceptional customer service and believe that building strong relationships with our clients is paramount. Our dedicated team is available, Monday – Friday from 9 AM to 5 PM to address your concerns, provide guidance, and ensure a smooth experience throughout your partnership with us.

Excessive Fees and Hidden Costs

Over time, hidden fees and unexpected costs can eat into your hard-earned revenue, making it challenging to maintain profitability. Other factoring companies may sell you on a 3% rate, but then turn around and charge fees for service, invoices, ACH transfers, monthly administration, and more.

At Bobtail, we think that’s nonsense. You shouldn’t have to pay anything other than the factoring rate to get your payments quickly – no surprises.

How to Get Out of a Long-Term Factoring Contract

When you’re ready to be freed from your existing factoring service, you will likely have a big hurdle to get over: the long-term contract. Most factoring companies require you to sign a contract, tying you to them for 1-3 years.

But don’t panic! You can probably get out of it in one of two ways:

1) Send Notice and Wait for the Contract Term to End

If you choose to send notice to your current factoring company and wait until the contract term is up to obtain a letter of release, it’s crucial to understand the specific rules and requirements set by your current factoring company. 

Different companies have varying policies regarding the notice period and the preferred method of communication. This could involve sending a physical letter through mail or simply sending an email. 

If you’re uncertain about the notice period and how to provide it, don’t worry. The team at Bobtail is here to assist you. You can reach out to us, and our experts will carefully review your contract, helping you determine the necessary notice period and the appropriate method for providing notice. 

Failing to give proper notice may result in the automatic renewal of your contract for another term, which is why attention to this detail is absolutely essential.

Or 2) Consider Early Termination

Alternatively, you can send notice to your current factoring company and inquire about the terms and conditions for early termination. Some factoring companies do not allow you to leave the contract under any circumstances.

In some cases, terminating a contract early entails paying a termination fee, which can range from a few hundred to several thousand dollars. While this option may involve an additional cost, it allows you to expedite the process of switching factoring companies.

If you need assistance in understanding the early termination conditions and associated fees under your current factoring agreement, don’t hesitate to contact our dedicated team at Bobtail. We can provide guidance and help you navigate the intricacies of your contract, ensuring you make an informed decision.

The Buyout Process: Transitioning to Your New Factoring Company

Once you have initiated the process of switching factoring companies, your old factoring company will need to undergo a buyout with your new factoring company. This buyout involves transferring your pending invoices from the old company to the new one. 

The purpose is to ensure that any outstanding payments owed by brokers are redirected to your new factoring company.

When this process is completed, you will get a letter of release (LOR) from your old factoring company that you can then send to your new company (Bobtail, of course!) to start using their service. The new company will then send the LOR and new notices of assignment (NOA) to the brokers you work with.

At Bobtail, we understand that this can be a complex process, so we verify all the necessary information and guide you through each step. We work diligently to ensure a seamless transition, allowing you to focus on your business operations without interruption.

Handling Refusal to Process Buyouts:

While most factoring companies are willing to process buyouts, there are instances where they may refuse to do so. If you find yourself in this situation, you will need to wait until the brokers have paid all outstanding invoices to the old factoring company. 

It’s important to note that during this period, your customers still have an NOA for your old factoring company. They will not be able to pay you directly or pay your new factoring company until they have the LOR from your old factoring company. 

That means you will need to hold on to your invoices and only submit them for payment after the buyout process is completed.

However, we understand that many carriers cannot afford to take a break from factoring. If this applies to you, we highly recommend reaching out to us here at Bobtail for assistance. Our team will explore alternative solutions and help you navigate through this challenging scenario, ensuring minimal disruption to your business operations.

Your factoring contract questions are welcome at Bobtail!

Switching your freight factoring service to Bobtail means flexible agreements, transparency, and exceptional customer service. While navigating the process of getting out of a long-term factoring contract may seem daunting, Bobtail is here to guide you every step.

Whether you choose to wait until the contract term ends or explore early termination options, we provide the expertise and support necessary to ensure a smooth transition. Additionally, our team assists in facilitating the buyout process, ensuring that your new factoring company receives the pending invoices from the old one.

If you have any questions at all about your existing factoring agreement, be it with Bobtail or another company, please don’t hesitate to email us at or call 410-204-2084.

Factoring made easy with Bobtail