If you’re a busy trucking company owner, it can be difficult to manage all the roles that are often required of you. And often, one of the most frustrating tasks can be dealing with payments, invoices, and the finances of the company. The trucking industry can be particularly challenging for new or small businesses, who struggle to stay afloat when they aren’t getting paid for 30,60 or even 90 days after delivering a load. These slow payments make affording payroll, fuel, and vehicle maintenance almost impossible, not to mention paying off debts or loans for equipment purchases or other business costs.
This is where freight factoring and payroll funding saves the day. Instead of sending your invoice to the customer and waiting for them to eventually pay you, you sell the invoice to the freight factoring company for a small fee, and they then give you your payment. The freight factoring company then sends the invoice to your customer and gets paid by them.
Freight Factoring Process
For a more in-depth overview of freight factoring, the process typically looks like this:
1.A trucking company submits a factoring application and gets approved by the factoring company
2.The factoring company determines which of the trucking company’s customers are creditworthy, and approves those they will factor
3.The trucking company sends the invoices to be factored, and the factoring company advances you the payment with a 3% fee
4.The factoring company works with the customer to send them the invoice and receive the payment
The trucking companies can have multiple invoices sent over to freight factoring companies at once, so they’re always getting paid on time. For newer businesses, it can be helpful to know that the factoring contracts are based on your customer’s credit and ability to pay their bills, since they are the ones responsible for bill payment.
Benefits of Freight Factoring
Freight factoring can benefit both owner-operators and fleet companies. For smaller businesses, high start-up costs, loan payments, and other everyday expenses are difficult to pay when customers don’t complete their invoices for three months. The middle man of freight factoring eliminates that stress, and empowers business owners to commit their time and energy to improving and growing their business, instead of making collection calls.
Owner-operators can enjoy same-day payments and full advances on their invoices, plus a non-recourse program. Non-recourse freight factoring also protects you if your customers fail to pay. The factoring company assumes the risk of nonpayment, and just charges a fee to the trucking companies.
Fleet companies can enjoy their own benefits, including low flat rates, same-day funding and even fuel advances. Even though fleets are larger, they can still benefit from getting paid faster and maintaining a positive cash flow. For companies without a dedicated accounting team, tracking down invoices is extremely time-consuming and often stressful. You can also choose to take on contracts from new customers, and trust that the factoring company has your back if they are slow to pay or even fail to pay.
Freight factoring is a smart choice for trucking companies of all sizes who want to remove the stress of invoicing, and focus on making quality deliveries. The simple process can help the busiest trucking companies take control of their finances and focus on growing and offering a great delivery service.
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