If you are a trucking company owner, you’ve likely heard of the term freight factoring. This is a mainstream financial tactic used by trucking businesses to secure cash advance funding on outstanding invoices. Essentially, your business sells an unpaid invoice at a discount in exchange for a lump sum payment upfront from a factoring company. A transaction such as this increases cash flow, while also fueling growth and allowing you to take on larger, slower paying contracts.
Freight factoring gives you the satisfaction and closure of being paid for work you recently finished. If you complete a large delivery, and then have to wait 30 to 90 days just to get paid, it can feel like you are working for free.
The immediate consequence of this situation is that you are stuck without access to much-needed working capital. It’s possible for trucking company owners to realize that they are:
- Unable to make lease payments
- Unable to pay for insurance
- Unable to fuel their fleet
- Unable to take on new jobs
Freight factoring is vital to trucking businesses of all shapes and sizes because it allows you to get paid today for the work that you completed today. Many freight factoring companies offer qualification within days and 24/7 same-day cash advances.
How Does Freight Factoring Work?
It’s often assumed — erroneously — that procuring funds through invoice factoring involves reams of complicated paperwork and difficult to meet qualifiers. The reality is that the process of freight factoring can be broken down into several simple steps.
First you bill your customer as usual, but you also make a copy and forward it to your factoring company. Then, the truck factoring company purchases the invoice, and fronts you a cash advance (up to 97%) of the invoice total, minus a nominal factoring fee that varies depending on your plan. Next, the money is deposited into your account within 24 hours — sometimes on the same day. Finally, once the factoring company collects the invoice from your customer on your behalf, they will reimburse you the remaining3% that was held in reserve.
If you find a trucking factoring company that understands your business, you’ll be able to get paid faster than you otherwise would. Many freight factoring companies such as Accutrac Capital specialize in the trucking industry and offer secondary benefits besides advanced funding, such as fuel cards and risk management through free credit checks to help you screen prospective clients, plus they take care of collections on your behalf. This convenient arrangement means you no longer need to make collection calls or track payments on your own. Rather, an experienced factoring company working on your behalf will take care of the collections for you.Visit their site to find plans that are custom-tailored to operations of varying sizes and budget.
With freight factoring, you’re no longer stuck waiting for a slow client to pay their outstanding invoice, leaving you in the lurch for 30, 60, or even 90 days. Learn more today about freight factoring and you’ll see how American trucking companies of all stripes use the upfront funding they receive from invoice factoring to cover overhead, maintain their fleets, and invest in new growth opportunities.