Why You Should Avoid Long Term Factoring Contracts For Your Trucking Company 


When it comes to using a factoring company for your trucking business, one thing you should avoid is getting locked into long term factoring contracts. 

Long term factoring contracts have many drawbacks and can prevent you from getting the most out of your factoring. At Provident Commercial Finance, we understand that flexibility is key when it comes to factoring. That’s why we don’t lock you into long-term contracts! 

Let’s take a closer look at five reasons why you should avoid long-term factoring contracts in factoring for your trucking company. 


1. Long Term Factoring Contracts Cause Loss Of Flexibility & Lack Of Adaptability

There are factoring companies out there that will push long-term contracts on businesses and promise stability in the ever-changing business world, but in reality, they have a dark side. One of the biggest drawbacks of long term factoring contracts is that they lack what is necessary for growing businesses, flexibility, and adaptive capabilities. 

With long-term factoring contracts, if something changes within your business or in the industry as a whole, you will be stuck with whatever terms were agreed upon at the inception of that contract. 

Even if those once agreed-upon terms no longer make sense for your business or are no longer beneficial, you will still have to abide by them under a long-term contract. As you can see, this can be extremely limiting and can prevent you from adapting your business to change and taking advantage of new opportunities available to you. 


2. Long Term Factoring Contracts Create Limitations On Services & Solutions

Whether you’re signing a long term or short term contract, there’s important information to consider. 

When it comes to long term factoring contracts, there may be limitations placed on what services and solutions are available to you as part of the contract. Depending on the specifics of your agreement, there may be certain services that are not offered or are limited in some way due to the agreement’s constraints and requirements. 

This can be extremely harmful to a business, and these restrictions can really hinder your capacity to reach out for helpful resources that could otherwise help grow your business or increase its efficiency and effectiveness. 

Long term factoring contracts can hold your business hostage under these restrictions for the life of the agreement, potentially causing your businesses’ growth to go stagnant.

Being aware of these provisions upfront can make all the difference when looking for solutions. Make sure any possible limits imposed are made clear and taken into account before deciding to engage in any contractual agreement.


3. Long Term Factoring Contracts Result in High Prices & Low ROI 

Another drawback to long term factoring contracts is that they often come with high prices and low returns on investment (ROI) compared to short-term contracts. 

Since investing in these agreements requires upfront payments along with other fees throughout their duration, they can become quite costly over time – costing more than they are worth in terms of ROI. Simply put, companies end up paying more under long-term contracts making the ROI minimal to nothing.

It is important to note that before considering any contract, it’s advisable to consider the costs thoroughly and make sure that the ROI is worth the investment. Otherwise, you will likely find yourself out of pocket for no real gain! 

4. Long Term Factoring Contracts Produce Unpredictable Payments & Fees 

Predicting payments and fees associated with long-term factoring contracts can feel like a bit of a puzzle. 

By the time the pieces fit together, it’s often too late to adjust one’s budget or plan around these additional costs. 

Many of these long term agreements contain obscure clauses that could invoke additional fees or adjustments that were not planned for and are based on certain conditions. 

All of this makes it more difficult to predict in advance and plan around when budgeting or forecasting future costs associated with them. This can be especially true for newer trucking companies in need of capital. 

The last thing these new companies need is to get trapped in a scenario where they can’t predict costs and get blindsided by price increases and out-of-the-blue additional fees. 

These long-term contracts and their unpredictable fees and adjustments can really hinder the growth and future planning of trucking companies that are already strapped for cash and can cause more stress and headache for new trucking companies than they are worth.


5. Know Your Options

When finding the right factoring company and contract terms, it pays off (literally!) to do your research and know all of your options before making a decision. Long-term factoring contracts lock you into a certain rate, which may become outdated as time passes. 

In order to avoid this, you should look for options that allow you the flexibility to adapt to the changing needs of your business. The value of what you are paying for is also just as important! When looking at different types of contracts, it’s important to ask yourself if what you are getting is worth the cost in the long run. 

Will this contract help or hurt my ROI? Are these terms financially sound? 

These are all questions you should ask yourself as you make this big decision. Make sure you pick the terms that offer the best value for your money, and never jump into something without exploring all possibilities first.

It should be crystal clear that trucking companies should avoid signing long-term factoring contracts for factoring services whenever possible—it just doesn’t make sense financially! 

Instead, look into shorter term agreements that provide greater flexibility and allow for easier adjustments when necessary; this will ensure that your business remains agile enough to respond quickly when change occurs so that you always remain competitive in today’s rapidly evolving industry landscape! 


At Provident Commercial Finance, we don’t believe in locking our customers into long-term contracts – instead, we offer zero term factoring contracts tailored specifically towards trucking companies so they can have access to fast cash without having to worry about being tied down with high interest rates or hidden fees associated with traditional loans or long-term factoring contracts. 

With our zero term contract and expert team ready to help, we strive to provide our customers with an honest, transparent financial service experience every step of the way! 

Contact us today if you’d like more information about how we can help!

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