Factoring is not a loan, which means that as the owner of a trucking company, there is no debt you need to repay. Instead, factoring your freight bills allows you to sell invoices instantly for a nominal fee, and it has become a mainstream tool for many in the industry.
Freight factoring provides fast solutions to carriers whose cash flow has slowed. Fleet and freight companies of any size can secure financing quickly and easily by turning uncollected invoices into up-front cash to help cover costs of operations, fuel, repairs, and payroll.
What is the process?
- Your company delivers as usual.
- You submit a copy of the freight bill to your factoring company, along with proof of delivery as well as a rate sheet. This paperwork can be submitted digitally.
- Your company receives an instant cash advance. As soon as the factoring company verifies the freight invoice, you’ll receive up to 97% of the invoice value right away — often the day after you apply. Funds can then be delivered to your account directly.
- The factoring company collects invoice payment from your customer on your behalf. With the factor handling collections, you’re able to focus on your business.
One major reason why so many owners of trucking and transportation businesses are turning to invoice factoring is because it helps companies of any size to manage cash flow. Factoring is not a loan; instead it involves selling one’s accounts receivable at a discount in exchange for immediate cash upfront. Invoice factoring — also known as freight or transportation factoring — allows trucking companies large or small to sell a financial asset they have in abundance (unpaid customer invoices) for the funding they need now. This helps them to meet their day-to-day overhead and operating costs.
Third party factoring companies like Accutrac Capital can provide you with same-day funding through a number of plans — simply choose the one that best suits your needs. Consider flat fee factoring (from as low as 1.59% of the invoice value); or perhaps a factoring line of credit is better for your business (at a rate as low as 0.022% per day — perfect for larger operations); or maybe you have customers that pay quickly, but you still need some rainy-day funding, in which case flex factoring is likely your best bet with rates as low as 0.49% for invoices that turn around within 10 days.
Invoice factoring has become increasingly popular — especially in the trucking industry — because it doesn’t force owners to turn away business simply because the customer takes several weeks or months to pay. Consider the many benefits of invoice factoring for trucking companies listed below, and discover how your trucking company can benefit.
Benefit #1: Factoring improves your cash flow
The primary benefit of freight bill factoring, and the main reason why so many companies employ it as part of their standard financial strategy, is that it improves your cash flow. Instead of waiting for upwards of 90 days for clients to clear their invoices, you get immediate payment minus a small factoring fee. This accelerated payment has a dramatic effect on your cash flow, allowing you to handle short-term expenses and, more importantly, it allows you to invest in long-term growth opportunities that you might not otherwise have the cash on hand to pursue.
Benefit #2: It improves the performance of your invoices
Some factoring companies, such as Accutrac Capital, offer additional accounts receivable management services on top of funding, and they will check the commercial credit of your current and prospective clients on your behalf. This service allows you to offer strategic terms — choosing only the accounts that have a very low chance of default. This tactic improves your cash flow while at the same time minimizing the time that you spend on collections.
Benefit #3: It helps increase sales
When used optimally, a freight factoring line of credit can help you increase sales because you no longer have to turn away clients that pay their invoices slowly. By selling the invoices of slow-paying customers for up front funding, you will no longer be limited by invoices, but instead you’ll see them as a resource to help you fuel your business.