In the fast-paced world of trucking, understanding the paperwork that keeps your business moving is crucial for success. Whether you're a seasoned owner-operator or new to the industry, factoring documents like Notices of Assignment (NOA), Letters of Release, and UCC-1 filings play a vital role in managing your cash flow and maintaining healthy business relationships. Let's dive into these essential documents and understand why they matter for your trucking operation.

What is a Notice of Assignment?

A “Notice of Assignment” also known as an NOA is a legal document that informs payers that a factoring company has a relationship with a carrier or business owner and should receive payments on that carrier's behalf. In trucking, the NOA informs the broker or shipper's accounts payable teams that all payments for loads hauled by that carrier should be remitted to the factoring company. This document ensures that both the factoring company and the trucking company get paid on time for the loads hauled.

When do you need a NOA?

If you plan to use invoice factoring and set up with a new broker you should make sure your NOA is included in your carrier packet. This will ensure that your factoring company is set up correctly with the broker and prevent payment delays or miscommunications.

If you are working with a factoring company for the first time or switching companies, it’s best practice to send out your new NOA to brokers you book with frequently. Some brokers take 3-5 days to approve NOAs and your factoring company might have payment terms that delay payment while the NOA gets approved.

What is a Letter of Release?

This is a legal document issued by a factoring company that shows that they no longer have a factoring relationship or agreement with the customer. This document is important if you have ever worked with a factoring company in the past or are planning to transition companies. If you don’t have this official document - brokers may delay payment on loads until they are sure they’re paying the correct person.

When do you need a Letter of Release?

If you’ve worked with a factoring company in the past but want to get paid directly or move to a new factoring company you will need a “Letter of Release” (LOR). To avoid a broker paying the wrong person, Brokers will ask the owner-operator or carrier for the LOR before paying them, which exists as proof that the carrier-factoring relationship with said factoring company is terminated

How do you get a Letter of Release?

You should reach out to your prior factoring company or partner to get a letter of release. Typically factoring companies won’t give you an LOR if you have an outstanding balance with them. If you’re trying to stop factoring all together you may need to wait until your balance clears. If you’re transitioning to another factoring company, this is when a buyout comes in where your new company buys your outstanding invoices

What is a Uniform Commercial Code (UCC-1 Filing)?

A UCC-1, short for Uniform Commercial Code-1, is a legal filing used to create a security interest in the assets of a business or individual. It is typically filed by a lender to establish their claim or lien on a debtor's assets, such as machinery, inventory, or accounts receivable. This filing provides public notice of the creditor's interest in the collateral. The UCC-1 is an essential tool in commercial lending and helps protect the rights of both creditors and debtors in financial transactions involving personal property.

Why do factoring companies file a UCC-1?

Factoring companies typically file a UCC-1 on a trucking company's accounts receivable to establish a security interest in those assets. When a trucking company enters into a factoring arrangement, they typically sell their accounts receivable to the factoring company at a discount in exchange for immediate cash flow. This provides the trucking company with quick access to funds without waiting for their customers to pay their invoices.

By filing a UCC-1 financing statement, the factoring company publicly notifies other factoring companies and lenders that they have a claim or lien on the trucking company's accounts receivable.

Here is a hypothetical example: 

Trucking Company A has factored $20,000 worth of invoices in the past month with their factoring partner. Subsequently, Trucking Company A, files for bankruptcy. If Trucking Company A has another business loan with a UCC-1 filed with priority over their factoring company, that lender likely would be able to collect payments from the brokers for the amount owed to the lender before the factoring company could collect on the $20,000 worth of accounts receivable already paid out. That is why it is so important for factoring companies to have the first position UCC-1 filed on their customers’ accounts receivable in order to offer their services.

How can a UCC-1 affect my business?

Some factoring companies will file a "Blanket" UCC-1 that gives them first right to all assets of their customer in the event of default or bankruptcy. Others will only file on the accounts receivable asset specifically. TruckSmarter only files on accounts receivable.

Having a UCC-1 filing on all your business assets can limit your ability to obtain some types of loans or business lines of credit if those lenders require a first position UCC-1 on your assets.

How can I remove a UCC-1 Filing on my business?

First you need to figure out who has filed the UCC-1. It's common for companies to use third party services to file their UCC-1s. Those companies' names will appear on the UCC-1 filing and you may not recognize them at first. If you aren't sure who filed a UCC-1 on your company, you can follow the steps below:

1. Look at the date the UCC-1 was filed. Check your email history around that time and see if you were talking to a factoring company or lender that may have filed it.

2. Contact the UCC filing company, as they will have information about the company that filed the UCC-1. The three most common filing companies are:

3. First Corporate Solutions

   • Corporate Service Company

   • CT Corporation System

After you figure out who filed the lien you can contact them to get more information and ask them to remove it if you don’t have a relationship. For more information and guidance on how to handle a UCC-1 filing, check out our help center!

Managing your trucking business requires more than just keeping your wheels turning – it's about understanding and staying on top of crucial documentation. By familiarizing yourself with these key factoring documents, you can navigate financial partnerships more effectively, avoid payment delays, and maintain the flexibility to make the best choices for your business. Remember, whether you're starting with factoring or switching providers, having a clear understanding of NOAs, Letters of Release, and UCC-1 filings will help keep your business running smoothly on the road to success.