Many small carriers use a factoring company or have a business loan. That doesn't stop a sale, but the debt has to be settled and released at closing.
Why it matters
Factoring companies and lenders usually file a UCC financing statement against the company. That gives them a claim on the company's assets, often including its receivables. A buyer needs the company free of those claims, so they're paid off and released at closing.
Find out what you owe
- Factoring: ask for a payoff letter showing any balance owed (for example, chargebacks or advances on unpaid invoices) and the steps to end the agreement.
- Loans and lines of credit: ask each lender for a payoff amount good through your expected closing date.
- UCC filings: search your state's UCC database for the company's name to see every filing, including ones you may have forgotten.
How the payoff works
You usually don't need to pay out of pocket. The escrow service can pay the lender directly from the purchase price at closing, and you receive the balance. The lender then files a UCC termination to release its claim.
What about receivables?
Money customers owe for loads delivered before closing usually stays yours. If you factor, those invoices may already be sold to the factoring company. Either way, sort out who collects what before closing and close or move the company's factoring account.
Personal guarantees
If you personally guaranteed a loan or factoring agreement, paying it off at closing should end the guarantee. Ask the lender for written confirmation.
Tell the buyer early
Disclose every loan, factoring agreement and lien up front. Surprises found during due diligence slow the sale or end it. Disclosed debts are routine.
Read next: Documents you need to sell.
This guide is general information, not legal, tax or financial advice. Rules and forms change; check FMCSA and talk to a professional about your situation.