Carriers and shippers know too well that quick and reliable cash flow (plus access to working capital) is essential. Historically, freight financing methods, like factoring, have helped bridge cash flow gaps… but the tradeoffs are high.
Quickpay offers a promising alternative, even a competitive edge, especially when partnered with strong financial institutions and technology providers.
With quickpay, the entire industry has a simpler, more cost-effective solution that not only accelerates cash flow but also strengthens relationships across the supply chain.
Let’s explore how quickpay ushers in a more efficient, affordable, transparent, and resilient supply chain - not just for your business but for the entire supply chain.
Factoring vs. quickpay
In order to understand the key differences, let’s first define factoring and quickpay.
- Freight Factoring involves a carrier selling its unpaid invoices to a third-party factoring company in exchange for a cash advance, minus a fee. The factoring company then collects the full invoice amount from the shipper. This method provides carriers with immediate cash flow but includes added costs and contractual obligations, like recourse.
- Quickpay traditionally occurs when a carrier submits an invoice, and a broker or shipper pays the carrier directly, often within a few days, for a small fee. With these expedited payment terms, the carrier sees improved cash flow without selling off the invoice.
Because factoring involves a cash advance, it generally features higher fees and is more complex. Quickpay, on the other hand, is more straightforward, with much lower fees (often as little as 1-2%).
The drawbacks of factoring for freight payments
While factoring has traditionally been a go-to, there are significant downsides to consider both for carriers/shippers and supply chains at large:
- High fees and lower profit margins: Factoring fees, often ranging from 3-5% of the invoice total, can erode profit margins, especially for smaller carriers.
- Complex contracts: Factoring companies can bind carriers to specific terms, like minimum volume requirements or cancellation fees, limiting the carrier's financial flexibility and making it difficult to pivot down the line.
- Tense relationships: When a carrier sells invoices to a factoring company, the company takes over the responsibility of collecting payments from the shipper. This can create tension between carriers and their clients, introducing a potentially intrusive middleman or suggesting that the carrier is financially unstable.
- Administrative strain: Factoring can require carriers to submit invoices, verify payments, and manage approvals. When considering the trade-off, the sunk time and resources may negate the convenience of a cash advance.
- Risk of recourse: Many factoring arrangements are “recourse” contracts, meaning if the shipper doesn’t pay the invoice within a set timeframe, the carrier may be responsible for reimbursing the factoring company. This exposes carriers to financial risk, especially if shippers experience payment delays.
Quickpay as an alternative to factoring
Factoring strains resources and relationships. With quickpay, carriers gain same-day payments without high fees, while shippers maintain control over working capital—a mutually beneficial arrangement that enhances liquidity, builds trust and cuts costs.
What makes Loop’s quickpay different?
Rather than having a broker, Loop uses AI to audit and approve carrier invoices. This streamlined workflow ensures that all invoices are accurate and compliant. With automation, shippers unlock access to offer carriers quickpay.
J.P. Morgan finances the payment, enabling shippers to retain their working capital while paying carriers as quickly as same-day. This enhances liquidity for the entire supply chain and reduces the costs associated with factoring. After the transaction is complete, the shipper gets a rebate from J.P. Morgan.
This process benefits both shippers and carriers: Shippers can use their capital more efficiently, while carriers are paid quickly at competitive rates, without sacrificing 3-5% of their invoice to a financing company.
Quickpay offers several other advantages:
- Efficiency: Carriers gain same-day payment, eliminating delays while allowing shippers to keep control of working capital.
- Simplicity: Unlike factoring, which involves third-party financing companies, quickpay reduces costs and eliminates risky contractual obligations.
- Transparency: An automated invoice auditing platform provides a fully transparent and highly accurate process.
- Liquidity: Carriers benefit from improved cash flow, while shippers enjoy extended payment terms, enhancing working capital.
- Accuracy: AI-powered auditing reduces payment cycles from days to hours. This real-time invoice auditing and approval process minimizes errors, disputes, and time spent on manual processing.
- Trust: Quickpay’s benefits for both shippers and carriers foster a more frictionless relationship. Working with a trusted financial partner facilitates consistent and reliable payment flow.
- Affordability: Factoring costs add up over time, which erodes profit margins. With quickpay’s competitive rates, all supply chain participants reap the benefits of lower costs.
- Reliability: A faster, more transparent, and liquid process ultimately supports a more reliable supply chain for all.
Quickpay fuels a more collaborative supply chain
Opportunities for improvement still exist in the procure-to-pay process, including connecting systems; automating invoice, payment, and reconciliation processes; and optimizing payment speed, cost, and working capital.
As supply chains move toward digitization and AI-powered solutions, quickpay will drive forward Supply Chain 4.0 through a rapid, automated payment system. When every dollar counts and delays impact bottom lines, quickpay offers a future-ready solution, turning payments into a competitive advantage and equipping shippers and carriers for the next decade of supply chain innovation.
The result will be complete transparency between both vendors and suppliers, and for all stakeholders.
Improve cash flow and boost profitability
Contact us to learn more about how Loop’s quickpay solution can support your financial goals and boost supply chain resilience.
