As the owner of a trucking company, you understand some frustrations. To wait up to 90 days before you receive payment from your customers is frustration. This impacts working capital, which is needed to grow and expand. Without capital, some owners can fall behind on major expenses. It is be no surprise that carriers are choosing to factor their invoices to a third-party factoring company. This improves cash flow and provides funding their businesses. The added flexibility and convenience afforded by invoice factoring explains why this is now such a mainstream financial tool among carriers of all sizes across the US.
The benefits of factoring are many. They include a simpler application processes than you’d find at most lending institutions, competitive rates, and faster funding overall. All of these things help to explain why so many truckers use invoice factoring services for their businesses.
What is invoice factoring? Good question. Invoice factoring, for those who are unfamiliar with the term, is a type of accounts receivable financing that allows you to sell outstanding invoices due within 90 days to a third-party factoring company. The factoring company will then typically grant you an advance. This advance is often roughly 80 to 90 or even as high as 97% of the value of the invoice. The factoring fee is usually small and differs depending on the plan you choose. You can often receive money the same day you send out the invoice. For many, this is a huge advantage.
The speed of the turnaround allows many trucking businesses of all sizes to take advantage of the funding for immediate growth opportunities or to take care of financial crises as they arise. Additionally, high approval rates mean that carriers qualify even if they don’t have the best credit. This is because a freight bill factor looks at the credit worthiness of your customers, and not you as a carrier.
The features and benefits of freight factoring with a reputable company are designed specifically to meet the grueling demands of hard-working trucking companies. When looking for the right factoring partner, it pays to keep a few important things in mind. Of paramount importance is to look for a company that you would want to work with in the long term (as most carriers don’t use freight factoring as an emergency button — but rather employ this type of financing as a sustained, ongoing financial strategy).
Freight factoring affords your trucking company increased flexibility. The same day funding you receive will offer cash flow solutions that turn your past-due invoices into much needed cash on hand. This means that your trucking company will appreciate the added liquidity and security that comes with factoring.