There’s a long road ahead for transportation factoring.
Two industry developments have caused companies to navigate obstacles and detours placed in the path of freight bill financing.
The Approved Factoring Company List
Transportation financiers were shocked earlier this year when one of the largest intermediaries and account debtors in the transportation industry implemented an approved factors list. In a nutshell, C.H. Robinson Worldwide, Inc. told motor carrier vendors they were not eligible for business if they used the factoring services of a company that was not on the list.
This left some transportation factoring companies stranded on the side of the road, unable to compete for business. To make their predicament worse, it could take until next year before the list is reviewed and any additional companies added.
As transportation factors work through the ramifications of the “approved factors list” it also gives rise to another concern, “Could this could set a precedent for other segments of the industry?”
The Motor Carrier Protection Act of 2010
This pending legislation was introduced on June 14, 2010, as Senate Bill 3483. It’s stated purpose is to “to increase the effectiveness of Federal oversight of motor carriers” by imposing tougher registration requirements on freight forwarders and freight brokers.
Here are few items the bill is proposing:
- Annual registration and renewal fees
- Separate registration as a motor carrier, freight forwarder, or freight broker
- Increase financial security requirements to $100,000
- Deposit at least $10,000 with the surety in cash
- Employment of an officer with 3 years relevant experience or acceptable certified training
For more details on the act including the full text of the bill visit: http://www.govtrack.us/congress/bill.xpd?bill=s111-3483
Who is most likely to suffer from these tightened restrictions?
You guessed it… small business. It will be harder for the smaller freight brokers to both enter and stay in business. This also impacts small business funding specialists like factoring companies since “the little guy” is more likely to turn to accounts receivable factoring.
While intentions to increase efficiencies or provide oversight protection sound noble, they also create roadblocks to transacting business. Groups like the International Factoring Association and the American Factoring Association have been working hard to pave solutions for the factoring community. For more information on getting involved visit factoring.org or americanfactoring.com.
I just checked with my US congressman’s office and these were my findings:
Senate Bill 3483 had gone into sub committee last year, and never made it out. It never made it out as there wasn’t sufficient interest and there’s not sufficient interest as of this year. The Bill will need sufficient interest before making it into the Congress & their sub committee.
The Congressman’s office made it understood this Bill wont make it to a vote, however they are kind enough to report back any progress, if any.
Furthermore, my Congressman wouldn’t vote for it. Its anti business.