Fuel Advances – Broker vs. Factoring Company
The big reason why you should stop taking fuel advances from brokers.
Fuel advances are a common way for carriers to get paid. Instead of getting a check for the full amount of a delivered load, an owner/operator can get a fuel advance from a broker or factoring company to advance them a portion of the invoice onto a fuel card.
What’s not to like about fuel advances? They’re a fast and cheap way for carriers to get their money.
But with all of the options out there, I can never understand why so many drivers take a fuel advance from a broker.
Owner/operators like fuel advances because of how fast they can get their money. If a driver needs to fuel up to get home or pick up the next load, waiting a day for the ACH transfer can be too long. Fees also tend to be less than other methods – ACH, wire, etc.
There are two main reasons why a carrier would ever request a fuel advance from a broker:
- they need the money to complete the run they are getting from the broker.
- the carrier does not trust the broker will pay in full after the load is delivered.
When I first started off as an owner-operator, I didn’t have a lot of cash flow. But even when I was nearly entirely broke, I never asked a broker for a fuel advance.
It’s important to remember that broker negotiations are all about information, and that can be good and bad for a carrier. As a driver, you want as much information as you can on a load to price it fairly. But giving a broker too much information about your personal financial situation can negatively impact your bottom line.
The broker does not need to know that you’re limited on funds to complete a load. The broker could think that I am not reliable enough to do the load and take it back. You also don’t want to be known as the carrier who has cash flow issues or is ready and willing to take on cheap freight because you’re tight on cash.
Needing a fuel advance should be thought of as a confidential matter with the carrier and a vetted third-party provider so that it never clouds negotiation with brokers. Yes, this all matters when it comes to broker relationships.
My advice to carriers – keep it private. Most carriers work with an invoice factoring company, so getting a fuel advance is just as simple as factoring, and you have the flexibility to choose what loads you take to take a fuel advance on.
If you’re interested in learning more about fuel advance programs and fuel cards, fill out the form below, and our rep, Mac Greene of Triumph Business Capital, will get in touch with you.