Factoring and notice of assignment (NOA)
Factoring means selling your freight invoices to a factoring company for cash now. The notice of assignment (NOA) is the letter that tells the broker to pay the factor instead of you.
How factoring works
You deliver the load and send the paperwork to your factoring company. The factor advances most of the invoice to you within a day or two, then collects the full amount from the broker on the broker's normal terms. When the broker pays, the factor keeps its fee and, under many agreements, releases any reserve it held back. The details (advance percentage, fee, reserve, who absorbs a broker's non-payment) are in your factoring agreement, not in any federal rule.
Recourse factoring means you owe the money back if the broker doesn't pay. Non-recourse usually covers only a broker's insolvency, not disputes about the load. Read the definition in your own agreement; the words are used loosely.
What the NOA does
An NOA is a letter, usually signed by you and the factor, telling the broker that your invoices have been assigned and must be paid to the factor's account. After a broker receives it, paying you directly may not clear its debt to the factor, so many brokers will refuse direct payment, or quick pay, until the NOA is released. That is a common source of confusion when a carrier changes factoring companies: the old NOA has to be released in writing before the broker will pay the new one.
Rate con clauses that interact with factoring
- Setoff: if a broker may deduct claims from "any amount owed to carrier", it may try to deduct them from invoices you've sold. Your factor will care, and your factoring agreement may make it your problem. See setoff.
- Claims deductions: the same issue, specifically for cargo claims. See cargo claims.
- Quick pay: often unavailable on factored invoices, or available only to the factor.
- Paperwork deadlines: "invoices must be received within X days" applies to the factor too. A late upload can turn into a fine or a lost invoice.
- Credit approval: factors check broker credit. If your factor won't buy invoices from a broker, that's useful information before you book.
What the Rate Con Checker does and doesn't do
The checker has no factoring rule: it doesn't read NOA language. But three of its rules matter directly to factored carriers: the setoff rule (any "set-off" or "offset" wording is a red flag), the claims rule (claims deductible from freight pay is a red flag) and the payment terms rule (45 days or more is a red flag). Factors price their fees partly on how long brokers take to pay, so long terms cost factored carriers too.
Practical steps
Send each new broker your NOA before the first load, ask them to confirm they've updated the remit-to, and keep that confirmation. When you leave a factor, get a written release and send it to every broker you work with.