Many trucking invoices take weeks – or even months – to get paid. Unfortunately, this delay creates a domino effect of financial strain on a trucking business. From not knowing where to find cash for fuel expenses to putting expansion on hold, these long payment cycles will stall your fleet’s growth.
The good news is that factoring services can bridge this cash flow gap. Instead of chasing your clients for payments, you can sell your invoices to a factor for instant funding – so instant that you can get your working capital in as little as 24 hours.
But do you really need this service? Read our brief guide below to know more!
What is factoring company in trucking?
Factoring is a financial service where a third-party company called a factor purchases invoices from businesses. From there, they will collect the invoice and charge the business with a small factor fee.
It’s a win-win situation for both parties: business owners get their funds fast, and the factoring company earns their keep.
But what does factoring mean in trucking? On the same note, freight factoring or trucking factoring also advances your invoice’s amount. This industry is known for its long payment cycles, which makes factoring a very helpful solution.
Take note that factoring isn’t only for struggling companies. Even big corporations use factoring for their financial leverage, allowing them to keep a steady flow of cash in their business.
At the same time, factoring gives small businesses the reinforcement to expand their operations. We all know how delayed payments can derail a small business and factoring can be a heaven-sent solution in such situations.
Do I need a factoring company for trucking?
Here’s why factoring for trucking company can be a good decision for your business:
1. You always worry about how to cover operational expenses.
If you always struggle with operating costs due to delayed client payments, maybe it’s time for you to consider factoring in trucking.
So, what is factoring in trucking? Well, this service advances up to 97% of your outstanding invoice within hours. Unlike loans or the traditional collections that could take weeks, factoring sends your funds the fastest.
This way, you’ll have the working capital to pay driver salaries, repairs, fuel costs, and more. You can sleep soundly at night without worrying about how to keep your trucking business afloat when clients take forever to pay.
2. You’re struggling with seasonal fluctuations.
During peak season, there would be a higher demand for freight services. This means you’ll have to cover a much higher operation cost until all your clients send their payments.
Unfortunately, not all fleets have the financial resources to sustain this surge. So, instead of waiting for clients to pay the invoice, you can explore factoring in the trucking industry to receive your revenue right away.
3. You’re struggling with the increasing fuel costs.
A factoring company not only funds your accounts receivable, but they also offer additional services to cushion the skyrocketing fuel costs.
Many freight factoring services also offer fuel advances, so you can continue delivering loads even if you’re short in fuel money. Once you’ve delivered the haul, you can factor the invoice and use the funds to pay back the fuel advance.
At the same time, you can also avail of the factoring company’s fuel card program. This will give you exclusive discounts on the factor’s partner fuel stops all over the country.
4. You’re planning to expand your fleet.
Are you planning to buy new trucks, but delayed payments stall your plans? In that case, it’s time to search about ‘what is factoring in the trucking industry’. Instead of putting your expansion plans on the back burner, you can turn your freight bills into cash to make it happen.
Since factoring companies give you instant funding for trucking invoices, you can easily plan for your business growth. You can confidently create a timeline, thanks to your steady cash flow.
5. You also need paperwork assistance.
How does factoring work in trucking, you ask? Aside from funding invoices, factors also provide back-office support. This includes collections, billing assistance, accounting, bookkeeping, and more.
A freight factoring company also provides free credit score checks on your shippers. This way, you can assess the shipper’s risk of non-payment and if they are a good repeat client in the future.
Aside from that, factoring companies can also provide financial reports about your factored invoice. This will help you get a better picture of your trucking business’ financial health.
Takeaway
If you want to boost your trucking company’s cash flow, partnering with a factoring service might be a smart decision. This way, you can receive funds from your invoices fast instead of waiting for weeks or even months for clients to pay.
Whether you’re an owner-operator or managing a big fleet, factoring can be a helpful financial tool. Just make sure that you partner with a reliable company that can meet the needs of your business. Also, always read the factoring agreement to learn more about the company’s recourse and non-recourse terms.
