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Benefits of Factoring During a Pandemic
FleetOwner spoke to TBS Factoring CEO Jennifer Lickteig to discuss the company's Pandemic Protection Program and how factoring has helped the trucking industry since the 1960s.
In June 2020, TBS Factoring and OTR Capital formed a joint partnership to help truck drivers during the pandemic. Through a program called Pandemic Protection Program, the finance firms offered a non-recourse flat rate of 2.5%, no matter how long it takes the driver to get paid, with no UCC filing fees, no origination fees or hidden costs. Available only to new customers and those that are not currently factoring, the firms offered no strings attached and no minimums required. Even though the program ended on Sept. 15, Jennifer Lickteig, CEO of TBS Factoring, discussed how the program came to be and how factoring has helped the trucking industry since the 1960s.
“When COVID was ramping up in April, I was telling a friend of mine in the industry what I was most worried about," Lickteig explained. "I said, 'What worries me is all the truck drivers and fleet owners out there who don't factor. How are they going to know whose credit is good? How are they going to know that to get that load and taking it across the country is going to get paid?' So, when I reached out to OTR, they said, “Yeah we’re in. Let’s do this together.”
During a conversation with FleetOwner, Lickteig also had the following to say:
FleetOwner: How did TBS get into the factoring business?
JL: We've been around since 1968, the year after the U.S. Department of Transportation (USDOT) was founded. We started out initially doing bookkeeping services and tax filing for truck drivers. When the USDOT was formed, everything got regulated and a lot of truck drivers didn't know or didn't have the capacity to do all the paperwork that came with operating their business. TBS, or Truckers Bookkeeping Service, was born on that concept.
FO: How does the factoring process work?
JL: Say a driver is going from Los Angeles to Dallas [incurring $1,200 in fuel costs], and when they get to Dallas, they have to take the time to pull over, get a WiFi connection, get a printer, print out their invoice, put the bill of lading together, get the rate sheet together, and then they have to find a Post Office and put that thing in the mail. And then they sit and they wait 30, 60 or 90 days to get paid. The average truck driver needs to have between $30,000 and $50,000 just sitting in a bank account, so they can take care of the fuel and the maintenance and the upkeep on the truck while they wait to get paid. Some drivers don’t have that kind of reserve. That’s where factoring comes in. Instead of a driver waiting one-to-three months to get paid, factoring allows the driver to get paid immediately with a small percentage deducted from their bill.
FO: Is there only one way to factor?
JL: There are two types of factoring. There's recourse factoring: If the factor doesn't get paid (back to us), then we get the money back from the driver. Our focus at TBS Factoring is the second type: Non-recourse factoring, where we take all of the risk of non-payment. So, if their customer never pays the bill, we're not going back to the truck driver to get that money. Sometimes there can be miscommunication around these two types. Because when we're taking the risk, we are shielding them from non-payment. Now more than ever, fleet owners and truck drivers need to factor even if it cost them 4% up front. It's still a 96% guarantee of getting paid [through factoring].
FO: Have you seen a lot of non-payment due to COVID-19?
JL: We have had non-payment go up, but it hasn't been anything that caused us concern. And the reason for that is when our non-recourse clients, especially if they're using our mobile app, can check credit themselves. If they're checking credit, and our system says “Do not factor” – that means don't take that load. The driver can choose to still take the load, but they can't factor that invoice with us. If they chose to take that load, they would need to get paid by the client directly.
FO: What do you recommend to drivers on the road during the pandemic?
JL: Through our mobile app, drivers can check a load, they can get on our load board and see loads, and they can check credit for loads they input. We have what's called a Fuel Finder. So, they can put their location, where they're going, and the TBS app will show them all the gas stations in between to get the lowest fuel costs.
FO: Do you think that as the pandemic continues you would bring back the Pandemic Protection Program?
JL: We're kicking around the idea of offering something that's really for intermittent factoring for independent owner-operators more around January or February of next year.