In trucking, there are always daily costs that put pressure on your cash flow. From payroll, fleet maintenance, or unexpected repairs to salaries and benefits, many trucking companies rely on immediate access to the cash value of their pending invoices. But even established companies can have a tough year and suddenly find themselves without the operating capital they need to keep things running smoothly — especially when a slow-paying customer takes months to pay an outstanding invoice.
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Trucking companies also often easily find themselves frozen out of loans from banks and other lending entities, especially if they lack an impeccable credit history or major collateral. Trucking companies of all shapes and sizes struggle to meet banks’ requirements for business loans, which is why so many of them rely on the convenience of factoring. Factoring also appeals to businesses that would not be able to qualify for traditional bank loans, such as smaller operations, start-ups that haven’t been around long enough to qualify for loans, or even larger carriers going through a lean year. Freight bill factoring or truck factoring is a growing alternative to banks for fleets struggling with cash flow. Some factoring companies, in fact, boast an approval rating as high as 99.9%.
Freight bill factoring rates are very affordable and with the right factoring partner, they are specifically designed to meet industry needs. Once the trucking company completes a haul, it sends an invoice to the customer and a copy to the factoring company, plus proof of delivery. Factors send the trucking company a cash advance that can be as high as 97% of the invoice within 24 hours (minus a nominal factoring fee). 3% is held in reserve. When the customer pays on its invoice, they then remit the reserve amount.
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Unlike with traditional bank loans, freight factoring is geared specifically towards the trucking industry, so there’s no need to explain the intricacies of your business to your factoring company. If you’re a trucking company owner looking to factor your invoices, look for a factoring company that works exclusively with trucking companies, so that there’s no need to explain the nuances of the trade.
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To get the best results, look for a company that offers plans with a flat rate structure or, if you’re a larger fleet, look for a factoring line of credit that gives you more control. This allows you to better manage your entire budget as your invoice factoring rate will remain constant. Also, it pays to be mindful of any time conditions, setup fees, or volume requirements, as this will change the nature of your partnership. And be sure to choose a company that allows 24-hour access to your account online.
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Sometimes trucking companies wait up to 90 days to collect, but even waiting a month can put the brakes on your cash flow. Consider freight factoring instead and get back behind the wheel of your finances.