If you are the owner of a trucking company, you need to make sure that every vehicle in your fleet is well-maintained, and that all of your drivers are paid. This is why cash flow is so critical to both truckers and trucking companies, as it not only keeps the business in operation, but it allows for growth opportunities as well.
This is why so many companies in the trucking industry rely on freight factoring to stay in the black month after month. Factoring continues to be one of the best options for truck drivers to collect money faster — because it generates the funds you need when you need them. Factoring freight invoices allows trucking companies of every size to receive immediate funding in the form of advances on unpaid invoices from a third-party factoring company.
The first step of the freight factoring process is quite simple, and as a trucking company owner you’re already doing it — you deliver your load normally. The second step is to submit a copy of the freight bill and other supporting documentation to your factoring company. This can be done digitally and instantaneously.
As a carrier, you will then be given an advance typically between 90% to 95% of the value of the invoice. A top-tier factoring company such as Accutrac Capital will advance carriers up to 97% of the value. The remaining 3% is kept in reserve and is remitted to the carrier once the customer pays on the original invoice.
You can see why this is such a popular financing option. Not only do trucking companies have access to a generous advance, but the actual job of collecting on the invoice now shifts to the factoring company, freeing up trucking company owners to do what they do best — track down leads and generate new contracts.
Freight factoring is so appealing because it offers a great deal of advantages that other financial solutions simply can’t. Factoring your freight bills is a great option because:
- It’s easy to receive your funding when you need it. Traditional loans from banks and other lenders are often very difficult to secure. If you don’t have the best credit in the world, or you’re a startup without a considerable amount of collateral, factoring invoices is going to be easier than securing a loan.
- Factoring speeds up your cash flow. Anyone in trucking knows that carriers need to be paid, and if they have to wait 30 to 90 days to receive their payment, it will detrimentally affect their bottom line — sometimes even to the point of bankruptcy.
Rather than waiting 90 days to receive payment for a service you’ve already rendered, freight factoring allows you to turn your accounts receivable — which would otherwise be sitting uselessly by — into the funding you need when you need it. With all the work you do as a trucking company owner, there is no reason why there should be a waiting period standing between you and the money you’ve already earned.
- Factoring gives you money to spend on growing your trucking business. When you are routinely stuck waiting for payment, it can become more and more difficult to take on jobs because cash flow is tight and you don’t have the cash on hand to pay for your drivers or maintain your fleet. Freight factoring alleviates this issue because you can receive payment upfront for invoices often within a day, allowing you to move seamlessly onto the next job.
- Factoring is not debt. Because you are essentially selling something you already own at a discount in the form of an unpaid invoice, factoring is not a loan and therefore there are no interest rates or hidden fees. Carriers simply pay a small one-time factoring fee when they receive their advance.
In order to stay afloat in the choppy waters of the trucking industry, consider freight factoring as an option for your business. Whether you have a fleet of four or four hundred, factoring can help you manage your cash flow, so you can keep your head above water.
